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.
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.
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.
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
When the new pound coin was compared with the threpenny bit, a currency that I think was last used in 1368, we should have known this would be a Budget for those in their dotage. The Conservative party’s core vote has eroded, in part because of the rise of the United Kingdom Independence party, which for all its huffing about the EU is more concerned with the familiar: immigration and living standards. The chart below, via IpsosMori/the Guardian shows the extent of this erosion. It depicts voting intention by age. Last year, for the first time, baby boomers became no more likely to say they would vote Conservative as the so-called Generation X (1966-1979).
At Wednesday’s Budget, the chancellor announced details of the “welfare cap”, which was first proposed in 2011. This is different from the benefits cap: the limit on the amount one household can receive in benefits per week. The former is a big, potentially sensible idea; the latter is a small, stupid idea.