Inflation, inequality and the inside truth on private care homes Top of the Charts 26 February 2021 Torsten Bell Sign up for our weekly Top of the Charts reading email Afternoon all, Happy pre-Budget weekend. Good luck to the sub-set of you beavering away on finalising it – I hope you’ll be returning the kind thoughts when the Resolution Foundation is up all Wednesday night analysing whatever you’ve dreamt up. We basically know what we’ll get economic forecast wise (last year wasn’t quite as bad growth/borrowing wise as thought in the Autumn, and the year ahead will be slightly worse on both fronts), so this is a policy focused Budget. The Chancellor has three big, but distinct, questions to answer. First, extend crisis support to match the roadmap out of lockdown. This is a huge deal, but won’t top the news given everyone’s priced in summer extensions of furlough, business support and the £20 Universal Credit top-up. Second, there’s how to boost the recovery post-restrictions. This won’t take the headlines because the Chancellor’s not interested in matching Joe Biden’s $1.9 trillion stimulus plan, or for that matter our own judgement that a stimulus of around £100 billion would be prudent. Instead we’ll get micro proposals (e.g VAT/stamp duty cuts and hiring incentives) and re-announcements of big investment spending (expect this in every fiscal event for the foreseeable future). So, third, my best guess is that the tax rises to come will be the big news come Wednesday night. Higher (but not as high as has been briefed) corporation tax and frozen income tax thresholds are decisions any Chancellor would make. But he’ll have a few more (sadly not the windfall tax on excess pandemic profits some of us want) that will give everyone the traditional post-Budget row they crave. To provide distractions from all the pre-Budget speculation over the weekend, this week’s reads steer well clear of it. Enjoy the light relief. Torsten Bell Chief Executive Resolution Foundation Inflation warnings… are all the rage in the US. We’re a bit late to the party, but Bank of England Chief Economist Andy Haldane got in on the inflation hawk action today. His speech is worth pondering, especially for those of us who don’t come to his conclusion (i.e. that inflation taking off is a big risk). He rightly notes that we’ve seen huge fiscal and monetary support, leaving firms and households (on average) awash with cash (extra savings of £100 and £150 billion respectively). Andy argues this cash will have to go somewhere, leading to a strong recovery in demand, but that the ability of the economy to produce things to meet that demand won’t be there (i.e. economic supply can’t recover fast given lost investment). The result is rising prices. The easiest example is that we all want to eat out by the summer but there will be fewer restaurants so prices will rise to ration the scarce tables. Now I agree that demand will bounce back in some parts of the economy (e.g. hospitality) and some inflation is perfectly possible. But I don’t think that’s the huge problem Andy sets out, because it would only ever be temporary unless it fed through into fast rising wages. The latter seems VERY unlikely in a country without collective wage bargaining, and with high unemployment (with workers lacking the power to demand pay rises). It’s still a valuable speech though: if anyone should be worrying about inflation it’s the Bank of England. Record keeping. Whether or not to keep the £20 Universal Credit uplift dominate current social security debates. But in the land before Covid Conservative governments have brought huge changes to the social security system since 2010. How does that overall record stack up is the question posed in major new work from, among others, John Hills, the hugely-sadly-recently-departed doyen of British social policy. Their answer is that social security got 1) smaller (spending down 10 per cent) and 2) more age based (age is now a stronger predictor of how much support you’ll get from the state safety net). As a result poverty reduction has stalled. Which brings us back to where we started: it’s the pre-crisis history, not the virus itself, that means we need to keep the £20. Unequal attitudes. Attitudes towards inequality shape the social security decisions above – so have a read of this deep dive into those attitudes in pandemic Britain. A few highlights. Unsurprisingly, place and income/wealth-based inequalities are viewed as the most serious. Concerns over the former are particularly shared across the political spectrum: 67 and 59 per cent of Labour and Conservative supporters respectively worry about area-based inequalities. The big gap between party supports is on inequalities between ethnic groups (62 per cent of Labour voters think they are a big deal vs 32 per cent of non-Labour voters). There is also lots of support for individual responsibility (e.g lots of people think that those losing their jobs during the pandemic have themselves to blame). The paper tells you quite a bit about why 1) the government is focused on levelling up, rather than taking statues down 2) lots of the commentary about Covid transforming public opinion on fairness/inequality is wishful thinking. Caring care homes? Private equity ownership of care homes costs lives… is the rather stark conclusion of new research (free version). Focusing on the growth in private equity ownership of care homes in the US in recent decades, the authors’ charge sheet is fairly damning. Comparing private equity owned nursing homes with others, they argue that such ownership increases mortality by 10 per cent. Oh, and it ends up costing more for these worse outcomes. Why? Because staffing levels and patient mobility fall while the use of medications goes up. Non-compliance with minimum care standards rise. Before everyone reads this as another excuse for Brits to scoffs at the US free market free for all in healthcare, let’s not forget we’re basically doing the same thing when it comes to large chunks of our social care system. Chart of the Week I love (and hate) this week’s Chart(s), because they echo the emotional roller-coaster of the past year. First, the good news. We’re a lot less anxious than during the shock of the first lockdown. The anxiety spike caused by the renewed lockdown in January is also now past. We understand better what confronts us, and vaccines also offer us a way out. But, as chart 1 shows, the sheer duration of the crisis is taking a toll on our well-being: satisfaction with life just keeps falling the longer the crisis has gone on. Which shouldn’t be a surprise given it’s been nearly twelve months since we’ve been able to go where we want, see who we want, and work how we want (almost five million people are currently on furlough). Turns out in pandemic life, you can’t get no satisfaction.