Ruinous relationships, parental paradise and the Government’s gamble on gambling 28 April 2023 Torsten Bell Afternoon all, It’s a sharp exit for Sharp dominating the news today. Having interactions with Boris Johnson was not good for his reputation or career. Shockingly. Labour will point to this as the latest evidence of chaotic government, but really this week reinforces the sense of the Government feeling stronger relative to its MPs and pivoting back towards being more… normal. Getting a BBC chair linked to a previous and far less ‘normal’ PM out, rather than having the row rumble on, actually helps. Then there’s the Foreign Secretary’s speech on China rejecting the popular on the right argument that it’s time to treat China as if we were in a cold war – an approach he labels “a betrayal of our national interest”. And you’ll have seen Kemi Badenoch being reported as dropping the truth bomb that thousands of retained EU laws aren’t about to be scrapped overnight. The Telegraph labels that a Brexit betrayal, but Rishi Sunak’s position is clear – Brexit needs to feel like it’s done, rather than a permanent revolution. The basic strategy is still rows on culture wars/immigration. But across economics and geopolitics, it looks a lot more normal. Have a great weekend. Normal or otherwise. We don’t judge. Torsten, Chief Executive Resolution Foundation Ruinous relationships.The interactions between personal finances and abusive relationships are a big deal. Research has documented how an economic shock can increase domestic violence. It’s also understood that economic control is often central to abuse (the UK’s outlawing of coervice/controlling behaviour explicitly covers economic abuse) . But as far as I’m aware a new working paper provides the first quantification of how an abused partner can lose their economic independence. Within two years of women moving in with a physically abusive man, their employment rates and earnings fall by 4 and 6 per cent respectively (having been growing on average in the years prior). As the authors emphasise, this weakens women’s ability to exit such relationships. Financial independence matters. Pandemic policy. The Covid public inquiry will take years, and the focus will be on the health side of things. But as TOTCs readers will remember there was a LOT of economic policy action, so good on our Institute for Government friends for providing their own mini-inquiry into how the Treasury did during the crisis. Their verdict: the Treasury did well on the ‘creating big new policy responses swiftly’ side of things (furlough etc) and badly on the central decision making on how to handle the pandemic (i.e. too often seeing their role as to ‘make the economic case’ vs ‘the health case for more restrictions rather than integrating economic/epidemiological considerations). That matches my, admittedly traumatised, memory. Parenting patterns. During school holidays children sleep and play more. But forget the kids because that’s the less interesting blindingly obvious finding of new research examining how the school year affects different family members’ time use. More interesting is that school holidays see parents spending more time on the good stuff – sleeping, eating, exercising and doing nothing. Basically because the logistical burden of caring for kids/driving them around eases. Also in ‘not news’ news, the effect is almost three times as large for mothers than fathers – term time costs them 34 minutes per weekday vs 12 for fathers. Skill setback? This is interesting. We all know being unemployed is bad for you in a host of ways – your well-being as well as finances get hit. Unemployment lasting makes it even worse: in Germany your chance of finding a job are five times higher immediately after becoming unemployed than two years in. Plus the long term unemployed are paid 20 per cent less than short term unemployed if they do get a job. Why? One argument has been that our skills atrophy during periods out of work, but a new paper debunks that with evidence from Germany and the US. Using non-cognitive (e.g. conscientiousness) and cognitive (e.g. maths) tests on unemployed people over a period of three years the authors find no decline during the period of employment (if anything, cognitive skills improve slightly). What does decline? Life satisfaction (with depression and loneliness unsurprisingly rising). Financial faith. When should policy makers leave people to opt-in to things vs. automatically including them but allowing opt-outs? Recent evidence that it really matters which you choose comes from the UK’s pension auto-enrolment success, which has seen the share of private sector employees saving double to over 80 per cent in the last decade. In case anyone’s not convinced further evidence comes from a study of a rather less well-known issue: the Swedish State Church Tax… Between 1952 and 1996, Swedish citizens were enrolled in the State Church at birth – which meant they paid the related tax of around 1 per cent of earnings unless they opted out. But just 10 per cent did so despite Sweden being a very secular country. In 1996, the system switched to being ‘opt-in’ (only baptised children were automatically church members/paid the tax), prompting a fairly heft hit (8.2 per cent) to church tax revenues. Particularly interesting is the finding that the opt-out system was regressive – being particularly effective in keeping lower-income people paying the tax even if they were free to opt out. The conclusion? Auto-enrolment is a powerful tool but only use it when there’s clear benefits for poorer households. Chart of the Week You know what’s hard to opt out of? A gambling addiction. This week saw a pretty hefty Government White Paper on gambling emerge. The proposals might not be as radical as campaigners wanted but it does represent a change in direction for Britain – clamping down on the sector, having encouraged it for lots of this century. Action to address problem gambling and addiction is to be funded by a new industry levy. There’s a balancing act here, but on balance I’m in the ‘about time too’ category. Gambling has surged in Britain (rising from being an £8 billion industry in the late 2000s to over £14 billion pre-pandemic) and so too has gambling addiction (see Gamble Aware research). The effect isn’t evenly felt, with COTW showing that low- and middle-income households spend at least twice as much of their income on gambling as richer households. Looking back, the last big, liberalising, reform to gambling in the 2000s may not have been the last Labour government’s finest hour.