Are routs only for the rich?

Afternoon all,

Another busy week at RF with *four* reports being published. I hope you caught our groundbreaking analysis into how households across the income spectrum benefit from public services, as the Spending Review (SR) moves into view.

The report covers some big trade-offs, such as how much the NHS settlement matters for what’s left. But small decisions matter too. SR2025 is a chance to bring forward promised employment support (including to help tackle youth inactivity), extend free school meals to all families receiving Universal Credit (directly lifting 100,000 children out of poverty), pivot apprenticeship spending more towards young people and tackle the existing barriers to SEND support in poorer areas.

Catch up on the launch event to find out what David Gauke and Sandra McNally had to say about the findings.

Keep reading to learn the true cost of Bank holidays, daughters, and stock market sell-offs.

Have a great weekend,

Ruth

Chief Executive
Resolution Foundation

P.S See how I managed to not mention Trump or tariffs the whole time? You’re welcome.

Dear daughter. I’ll be honest, this is one of those papers that is fascinating but I hope someone can tell me it’s wrong. The parental earnings penalty is greater when mothers have a girl, according to analysis of UK births since 2010. While mothers of sons see a 3 per cent fall in income (averaged over the five years after the birth), this figure rises to a jaw-dropping *26 per cent* for mothers of daughters (in line with lower employment rates for the latter). This is surprising to say the least – a baby is a baby, surely? The authors examine time use data which shows mothers take on more domestic labour when a daughter is born. After a son arrives, women do 26 per cent more of the chores, but after the birth of a daughter they do 43 per cent more. This is (unsurprisingly) accompanied by a 5 per cent penalty in mental wellbeing, as well as reduced satisfaction in their relationships with their male partners. The authors suggest there may be some self-perpetuating intergenerational transmission here – since it means daughters are more likely to grow up in families with ‘traditional’ gender roles. But why?? More digging needed….

Planning problems. The UK planning system isn’t working, and the OBR has high hopes (which we share) for the Government’s plan to reform it. This deep dive considers why the system sucks and (unfortunately) concludes that reform won’t be easy. Our system is “adversarial-judicial”, where planning authorities play the arbiter between developers and objectors. It’s set up to encourage extreme risk-aversion. Developers don’t know what objections might successfully block a project, so they give lots of money to consultants and lawyers to think of solutions or redress for every possible issue. It’s hard to address this problem via deregulation alone. The contradiction at the heart of this issue is that the “corporatist” approach taken by economies demonstrably better at Getting Stuff Built is also a “source of sclerosis” for EU economies – and yet it looks as though infrastructure planning may be one area where it’s an approach that pays off.

Blockading Britain. This paper explains how the British economy managed to feed itself during the German blockade in World War 1, despite initially being dependent on shipped imports of food. At the start of the war Britain produced 35 per cent of its food domestically, while Germany managed 80 per cent – yet the German population suffered worse food shortages. The key to our success was a flexible economy with capacity for substitution. Measures to economise our existing shipping flows, build further capacity, reduce consumption of imported goods and boost domestic agricultural production successfully prevented food shortages in Britain. Meanwhile, the excessive demands of war on the German economy weighed heavily on agriculture causing a decline in domestic production. So, in this instance, imposing tariffs and reducing imports (as Germany did at the turn of the century) did not create domestic economic security, but a rigid economy that couldn’t cope with competing demands upon it.

Driving decarbonisation. Here’s some good news (phew!) from the car industry – used Electric Vehicles (EVs) are now cheaper than petrol equivalents. This blog reveals that over the last few years EVs were on average over £2,500 cheaper than their combustion engine equivalents. Until recently the upfront cost of EVs has proved a key barrier to increasing their number on the roads. New EVs remain pricey – but 80 per cent of car buyers in the UK buy second-hand, so this is still a game changer. Apparently, you can get an electric Audi for £6,000 less than the petrol model. The net zero transition is going to be all about consumers from here on out, with one of the other big challenges shaping up to be household heating.

Something for the weekend? | A run on the bank holidays

April has arrived, the first of the Bank-holiday-having months – with May hot on its heels providing two more welcome rests for a weary nation. Bank holidays are widely beloved, but at what cost?

Last year DCMS put the cost of a single bank holiday at £2.4 billion – and that’s accounting for additional retail sales and the “bounce-back” effect in the days following! All three months with additional bank holidays in recent years also saw declines in monthly GDP (although to be fair, that’s been true of plenty hard-working months too).

Loyal readers may remember Tim Leunig’s controversial call to abolish them (since pay-walled) on the grounds that we should just get more annual leave instead. Somewhat unsurprisingly, the TUC thinks we should have more, and the IEA think we have quite enough already.

I’d like to say I picked this topic before I heard the bank holiday chat on *that podcast* this week. The bromance mused whether these estimates are inaccurate now that plenty of people don’t work in traditional patterns anymore. Some think four-day weeks would boost productivity, but it’s worth remembering that flexible work is still not the norm.

Anyway, I hope you enjoy your FOUR extra days off between now and June. Was this all a long segue-way to tell you that TOTC is on holiday next week? Maybe so.

Chart of the week

The global economy has been on a wild ride since Trump’s ‘liberation day’. While the rollercoaster has been partially paused for 90 days, expect more uncertainty ahead. But what do stock market moves mean for households? A lot less in the UK than the US. Just 4 per cent of UK assets are held in stocks, bonds and funds, compared to an OECD average of 8 per cent and a whopping 30 per cent in the US. That still means some losses as a result of recent moves though. As Chart of the Week shows, those are concentrated among higher earners – 48 per cent of the fall in value investments has accrued to the richest tenth of households. And the losses are significant – £9,300 loss in wealth on average for rich households is equivalent to 10 per cent of their annual income. But while better off households may bear the brunt in the short term, poorer households are more exposed in the long term, both to an economic downturn and a rise in prices from trade fragmentation.