Monthly Archives: March 2014

Every week or so, in my previous job as comment editor, I would chat to Sir Samuel Brittan about his column. “Sam”, as he prefers, would have two or six suggestions and he was too polite to let on whether the conversation was mere courtesy. Despite his uncanny ability to arrive at my desk five minutes before deadline, it was invariably one of my favourite moments; the FT can be a special place to work.

I would occasionally suggest to Sam that he write about, say, the latest development in the eurozone crisis or the most recent announcement by the UK government. He would give the uncanny impression of someone contemplating what I had said. But soon enough, I had been enlightened as to the irrelevance of the emphemeral. More than once, Sam explained as follows: “I’m more interested in ideas.” Read more

At the Budget last week, George Osborne said that “under this government income inequality is at its lowest level for 28 years”. Talk about chutzpah. Not only is this fact reflective of the financial crisis and the response of the social security system it is also marginal in a historical sense.

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On Tuesday, official data showed that UK inflation, as measured by the Consumer Price Index, rose by 1.7 per cent in the year to February, a slower pace than the 1.9 per cent reported last month. Employee earnings adjusted for CPI fell at their slowest pace since April 2010. If “real wages” were to rise this year, the government hopes this fact would protect it from attacks by the opposition Labour party about the cost of living. The gap between inflation and earnings is more than simply a technical matter.

However, that makes the technicalities more important to understand. The analytical debate about “real wages” tends to focus on measures of wages. But how inflation is measured obviously matters, too. This chart from the Resolution Foundation shows two forecasts for real weekly median earnings – one using CPI and the other using RPI-J, a supplementary measure that includes housing costs and has a controversial history.

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In the capital, about half of households rent. The other half own.

At present, the official of national statistics’ monthly house price data are a cause of mixed emotions; there needs to be a psychological term for renters’ remorse.

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The pension reforms announced at the Budget have jolted Westminster from its pre-election ennui. Conservatives and Liberal Democrats are cock-a-hoop. But “It has been a disorienting few days for the opposition”, as Rafael Behr writes.

This is what can happen when a new policy is as uncompromisingly ideological as the change to annuities. Most of the objectives for government policy are not inherently divisive; parties tend to disagree over means rather than ends. In this case, however, the chancellor succeeded in making whether one supports or opposes the idea of voluntary annuities a case study in moral discombobulation. Read more

I like it when one chart demolishes two myths.

The graph below from Citi’s Michael Saunders shows how the coalition government has consistently delayed its fiscal tightening.

This suggests how the chancellor has been less dogged in pursuit of “plan A” than often believed. If you were being kind you could say it was a sign of pragmatism. But it also indicates how, contrary to the Budget rhetoric about responsibility, George Osborne is funding some tax cuts with temporary revenue-raisers and unspecified spending cuts. Ironically, it is the sort of financial short-termism depicted above that worries the morte thoughtful critics of the chancellor’s pensions changes. Read more

“HS2 chief envisages benefits across north ” Financial Times, March 18

I’m buzzin’ for high-speed rail, like the rest of Manchester.

Some might say.

It’ll be supersonic.

It won’t be that fast but it will cut journey times among some cities north of London and between them and the UK capital, according to High Speed 2 Plus.

What’s that?

The latest master plan for the controversial rail network.

That’s well mint.

Doubtless. But before you acquiesce to a £50bn project, shouldn’t you ask for whom it is well mint? Read more

On Thursday, the Institute for Fiscal Studies delivered its verdict on the Budget. If you prefer prose, I recommend director Paul Johnson’s lucid explanation. But for pithiness, you can’t beat this slide from Gemma Tetlow’s presentation:

For all the chancellor’s talk of investing for the long-term, the evidence from the IFS suggests that he is doing the opposite: funding permanent tax cuts through temporary schemes and to-be-determined spending cuts. Read more

In spite of his genuinely radical pensions reforms, George Osborne’s Budget had a familiar underlying theme: austerity will be with us, or at least some of us, for the rest of the decade. In this respect, the next parliament will be like the last.

However, the way the public finances are measured will change. The below is quite wonkish but it could have an important political consequence, making it more likely that the chancellor will meet the second part of his “fiscal mandate” – that public sector net debt excluding financial transactions is falling as a share of GDP by 2015/16, despite nothing having changed in the real world.

I’ll try to make the following as painless as possible. Read more

The pension changes announced at the Budget are explained quite well in the formal consultation document. I like the additional freedom being offered to pensioners. I don’t weep for the injuries to the annuities industry. But I’m worried about the short-termism that could be unleashed and the scope for new charlatans. It is no coincidence that behavioural economics is arguably most useful in pensions policy, when it helps to overcome inherent biases towards undervaluing our lifespans.

One aspect that has been neglected so far is social care – and this could end up being the test of the wisdom of the reforms. Paying for elderly care is one of biggest and fudged issues in public policy. Labour policy is that social care services should be merged with the NHS; thus it would be paid for out of taxation. When the opposition works out what it thinks of the proposed reforms, I’d expect it to talk a lot about social care.  Read more