Blog

The road to a jobs recovery is longer than it seems

James Plunkett

This post originally appeared on the Huffington Post

For anyone hoping to sift a nugget of gold from recent economic data, employment stats have been the place to look. In the past year, the number of people working in the UK has risen faster than at any time since 1989, a remarkable performance from an economy with close to zero growth. Not only have these figures befuddled economists, prompting much debate of a productivity puzzle, but they've also encouraged a sanguine view of the jobs recovery. As the prime minister and leading commentators have been fond of pointing out - and rightly so - employment is now back to pre-crisis levels, making this one of the few economic indicators not keeping the Chancellor up at night.

Yet step back from a narrow focus on the number of people in work and the challenge we face on employment is daunting.

James Plunkett

This post originally appeared on the Huffington Post

You can tell a lot about a downturn by the image that comes to define it. From queues outside job centres in the 1970s and early 1980s to the poll tax riots that preceded the early 1990s recession, the pictures that stick in the mind have a habit of reflecting the key economic and political challenge of the time. So what will be the iconic image this time around? Images of last summers' riots will undoubtedly endure. But the more representative picture of the squeeze so far would be much less dramatic: a low paid, part-time worker, struggling in to work each day, bringing home a wage that barely pays the bills.

Today's new figures from the ONS confirm what's been suspected for some time: low pay is fast becoming one of the defining economic challenges of our age.

James Plunkett

This post originally appeared on The Spectator

With the Coalition taking pre-Budget briefing to new levels you’d be excused for thinking there’s little we don’t know about tomorrow’s statement. But here are four questions we can’t yet answer, and that will be crucial to assessing whether this is a Budget for low-to-middle earners as the Chancellor claims:

1) Will the new increase in the personal allowance be restricted to basic rate taxpayers? When the Coalition raised the allowance by £1,000 back in April 2011 they cancelled out the benefits to those at the top by lowering the 40p tax threshold. The second time around — the £630 increase that kicks in this April — they didn’t. From the sound of things, Osborne is now set to announce a further large increase in the allowance for 2013 and possibly even beyond. So will he focus the benefits on basic rate taxpayers this time?

James Plunkett

This post appeared on the OECD Insights blog

Do workers reap the benefits of productivity growth? Few questions are more central to the conundrum of faltering living standards. If the 20^th century was a golden era for material wellbeing in Britain, that’s explained by one factor above all others: from 1900 to 2000 UK labour productivity grew roughly fourfold, translating into unprecedented growth in real earned income.

Of all the findings from our recent work at the Resolution Foundation, then, few are more worrying than those that suggest a weakening

James Plunkett

This post originally appeared on the New Statesman

It may still be early February but the March Budget has already kicked off. This morning's Telegraph splashes with Danny Alexander's first attacking move, with the Chief Secretary saying he strongly supports a reduction in higher rate pension tax relief to fund further increases in the personal allowance. For all the Lib Dem's previous talk of mansion taxes and crackdowns on tax evasion, this is serious stuff. Alexander claims the government could save £7 billion by reducing the 40p tax relief currently given to higher rate tax payers to 20p, the first cash on the table that would come close to funding his party's ambition on the £10k allowance.

Are we facing an American nightmare?

James Plunkett

This post originally appeared on the Spectator blog

With the Chancellor’s autumn statement due next Tuesday, we're all talking about growth. The ECB and Bank of England now say the UK economy is set to grow at less than half the rate the OBR forecast back in March. That makes it all but certain that George Osborne will announce dramatic downward revisions to UK forecasts when he stands up in parliament next week.

But before all the fighting about Plan As and Bs reaches fever pitch, it’s worth asking what the next decade looked like under the previous, more optimistic growth projections. The answer isn’t pretty and it helps highlight one major question that’s rarely asked in our debate about GDP: what kind of growth are we after?

Goodbye to the good life

Gavin Kelly and James Plunkett

This article originally appeared in Prospect

In the three months from July to September, Britain’s economy actually grew—by 0.5 per cent. That performance was less bad than many had feared, and some have seized on it as a source of hope. For Chancellor George Osborne it was a “positive step… laying the foundations for the future success of the country.” Even Bank of England Governor Mervyn King, hitherto the nation’s self-appointed prophet of economic doom, recently said that the squeeze “is now beginning to come to an end.” Whether or not such sparks of hope prove justified, they obscure a much bigger question: even if the economy recovers, will living standards improve?

Child poverty: We need to rethink our 2020 target

James Plunkett

This post originally appeared on the Independent blog

This morning the IFS published its latest projections for poverty. The stats have been widely reported, with most coverage focusing on the ‘unprecedented’ seven percent squeeze on middle incomes. But perhaps the more surprising figures are those for long-term trends in child poverty. On our current path, 800,000 more children will fall into poverty by 2020, a rise in the child poverty rate from 19.2 percent today to 24.4 percent. That’s the kind of sustained increase in child poverty not seen since the 1980s – and an almost complete reversal of the 900,000 children lifted out of poverty under Labour. It’s a wake-up call for both parties and a chance to seriously rethink our approach to the 2020 target to abolish child poverty.

You might say that, given the current crisis, these gloomy figures aren’t surprising – things will take time to recover and we shouldn’t overreact. But this story, of an economy knocked down and slowly getting back on its feet, simply doesn’t fit the reality. On the contrary, relative poverty is perversely set to fall in the short-term because those in the middle are fairing so badly.

The coalition's £11bn stealth cut

James Plunkett

This post originally appeared on the New Statesman blog

A technical quirk will allow the government to skim small amounts each year from lower income households.

What's the biggest cut George Osborne has made as Chancellor? Scroll through the Budget Red Book and the answer may surprise you. There's the removal of child benefit from higher rate taxpayers, clocking in at £2.5bn by the end of the parliament, and there's the time limiting of incapacity benefit which will save, eventually, around £1.2bn. But the biggest cut of all makes both moves look like minnows. It's the switch from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI) as the measure used to calculate tax credits, benefits and public service pensions.