Pandemic pensions and victorious vaccines Top of the Charts 4 February 2022 Torsten Bell Morning all, This week’s TOTCs comes from a snow pattered Glencoe where never-ending gales are the order of the day. The battering you get walking on the hills is a rather unsubtle symbol of what 2022 has in store for household finances. Prices up, bills up, interest rates up and taxes up is where we are, with the Bank of England yesterday forecasting disposable incomes will slump 2 per cent. That would be the largest annual fall on record, which go back to 1948 (or 1990 for you RHDI pedants). Either way, it’s worse than many a recession, and it’s certainly not what a recovery is meant to look like. It’s a fact that surging global energy prices will make us poorer as a nation. But we have choices about how that pain is shared. And we need to make better ones. The Government’s package of loans and rebates will ease the energy bill pain for many of us, but there’s simply not enough support there for the poorest households – as this week’s chart sets out. Have a good weekend battening down the hatches. And the thermostats. Torsten Bell Chief Executive Resolution Foundation Bad apples. Do longer prison sentences work is the question asked by an interesting new blog. Partly yes, and partly no is the nuanced argument certain to upset everyone in this polarised debate. The author argues the threat of prison isn’t generally doing much to reduce crime, but keeping people in prison does. The most interesting argument is that both of these conclusions follow from the fact of where crime is highly concentrated: 1 per cent of households in the UK experienced 42 per cent of burglaries, and reoffending rates are amazingly high. So, prison sentences reduce crime, not by scaring off potential criminals, but by incapacitating the handful of bad apples who are actual criminals. Raring to retire. While we’re on the blogs, read the (not uncontroversial) suggestion in Henry Tapper’s latest offering that the big fall in labour market participation among older workers the pandemic has left us with is linked to George Osborne’s liberalisation of how/when people can draw down pension pots. The argument is that the pandemic encouraged some to retire early, and that access to pensions for those in their late 50s and early 60s has made it possible. Worth a thought. IT inequality. The ICT revolution often gets blamed for contributing to higher income inequality (e.g. increasing productivity of high earners, and replacing the jobs of low earners). But a new paper says it also increases inequality because as IT gets cheaper it reduces the prices of IT-intensive products disproportionately consumed by richer households (e.g. insurance) more than less IT-intensive ones bought by the poor (e.g. food). In fact the authors argue this consumption effect does more to increase inequality than ICT’s labour impact on income inequality. We all benefit from digitisation (except the kids, argues Sam Freedman) but some more than others. Victorious vaccines. It’s nice to read about successes not just failures. So I enjoyed Nick Timmins and Beccy Baird’s new report for the King’s Fund on the UK’s Covid-19 vaccine programme. It covers the ups and downs of the programme well – with the success of the Dads’ Army style volunteers particularly heart-warming. Not everything has gone well policy wise in recent years, but jabs were a job well done. Lots of levelling. Levelling up chat was everywhere this week on Wednesday – before the energy bills catastrophe and Downing Street resignations made grands plans for what the government will do over the next decade slightly academic. But for a reflective moment here’s three blogs on it with food for thought (obviously don’t read the 400-page White Paper itself unless you’ve got an insomnia problem, and even then I’d try drugs first). First up Resolution’s own Lindsay Judge and Charlie McCurdy cover the big picture of how Michael Gove is basically trying to combine George Osborne style devolution with early New Labour’s target-driven focus on closing gaps between poor and rich places. Then check out Henry Overman’s suggestion that the White Paper not only doesn’t have enough cash, but also doesn’t wrestle with some big trade-offs. And lastly Rachel Wolf rightly notes that while Michael Gove has set out something claiming to be an agenda for the whole of Government, there’s a rather large problem: he only runs one department. And it’s not the Treasury. Chart of the Week Rishi Sunak has developed a habit of mini-Budget-esque announcements outside of the usual Budget timetables. Pandemics will have that effect. Yesterday we even had the Bank subbing in for the OBR with some big picture – and hugely grim – forecasts. The immediate focus was the £693 a year rise in typical energy bills announced by Ofgem for 1 April. This living standards disaster triggered the Chancellor’s £9bn energy bills rebate plan. As Chart of the Week, taken from our overnight analysis, shows, the rebates (over half of which is actually loans) cover half of the rising energy bills costs for many, but leave the poorest households in Britain facing a massive hit from April. That’s happened because the Chancellor has opted for a near universal approach to tackling the energy bills crisis (hence the use of the council tax, rather than the much better targeted at lower income households Universal Credit to direct funds). One-in-eight poor families won’t even get the £150 Council Tax rebate. But the package is a whole lot better than some of the others he rejected – notably cutting VAT on energy bills and stalling the NI rise. Those calling for the latter were asking for a giveaway to the rich amid a cost of living catastrophe for the poor.
