The Tories must be cursing the Office for National Statistics. Just when they wanted to trumpet solid growth in the economy nine days before the general election, pesky official figures suggest growth of only 0.3 per cent in the first quarter. There is no doubt this is a bad figure. As the chart shows, it is the worst quarterly growth rate since the end of 2012.
The big action in the 2015 UK Budget comes in the moderation of public spending cuts. It doesn’t feel much like a rabbit out of a hat, but kills Labour’s charge that the ideological Tories are planning to cut public spending to its lowest level since the 1930s.
This is clear from the long run graph that total managed expenditure had been set to fall to extremely low levels (in green, the colour of the Autumn Statement). Though still true, spending now falls to a level just above the lows of 1999-00 and 1957-58.
Choices matter when measuring living standards. When looking at Britain’s living standards since before the recession, you can legitimately say incomes are back to the pre-crisis levels or still 10 per cent below those levels.
This post explains how (and the choices the Institute for Fiscal Studies made in its report this morning).
It showed UK living standards were back to the pre-crisis level. The IFS is an extremely reputable research organisation*. It also noted that the recovery in living standards has been painfully slow since the recession and household living standards still have not reached the 2009-10 peak.
I will show in this blog that definitions of living standards really matter, as do the choice of inflation measure, the choice of time period and the choice of average. It is perfectly possible and reasonable to arrive at a conclusion that living standards are 10 per cent below the pre-recession level with the same data as IFS used. This does not mean the IFS is wrong, but it has made choices that reduce the measured drop in living standards.
This is the IFS chart. Read more
1. Forget the announcements
The net tax and spending measures are tiny compared with the forecasting changes to tax receipts. The purple bar on the right of this chart shows just how small the announcement are relative to the Office for Budget Responsibility’s forecasting changes. Read more
No one should be under any doubt. Jill Matheson, the national statistician, is consulting on changing the mathematical formula underpinning the venerable retail price index because the Office for National Statistics wants it changed. Consultations are not launched when experts think the status quo is fine.
At the heart of the issue is the realisation that the RPI formula is deficient and out-of-date. Continuing with the current method is the equivalent of Britain still thinking a 1970s Austin Allegro is cool, while the rest of the world is driving the latest Mini.
Find out how your living standard compares.
Select the range of years that contains your date of birth and watch as the graphic draws the spread of UK household incomes for people of your generation.
A few people have asked me for more data and information on the jinxed generation article in Saturday’s paper, which shows the youngest cohort of people entering the labour market were the first in over 50 years not to have higher living standards then their immediate forebears.
This post will be quite long and full of charts. It essentially shows our working. Read more