ONS pay squeeze figures show families being “clobbered” by cost of living crisis
Responding to today’s ONS figures showing yet another fall in real-terms pay once inflation is taken into account, Liberal Democrat Treasury Spokesperson Sarah Olney MP said:
While this endless Conservative psychodrama unfolds, hardworking families are being clobbered by the cost of living crisis.
This Government is so mired in their own infighting that they are neglecting the real issues that matter to people. This is a party that is out of touch and out of ideas.
Families and pensioners have suffered under this Government for far too long. Ministers need to urgently bring forward a proper plan to grow the economy, create good jobs and tackle the cost-of-living crisis.
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26 Comments
Does our party have a proper plan?
It’s not just the Tories who are “out of ideas”. There no discernible significant difference between the major parties on either economic or political policy at present. Sure, removing unfairnesses, like non-dom tax status, are worth doing but they aren’t going to “fund” any major changes to the economy.
The only claim that both Labour and LibDems can make is that they can somehow, in some very vague way, grow the economy better than the Tories. The idea is that an increase on N% in GDP will provide N% more money to spend on the NHS. Unfortunately, it doesn’t work quite like that. If we’re all better off because we are producing more, it is inevitable that everyone will share in the extra income generated.
Therefore Nurses and Doctors will be N% more expensive, as will civil servants, police, teachers, military personnel etc. So we won’t end up with more nurses, doctors, carers teachers etc just by growing the economy.
This is not to say that we shouldn’t try to do that but we do need to be more realistic about what we are trying to achieve. If we want more carers, for example, we have to do what it takes to make working as a carer relatively more attractive than other comparable jobs which may be on offer.
I am dismayed to see our spokesperson parroting this Tory trope of “hardworking families.” I am neither hard working nor a family, but single and retired (and as it happens not “clobbered” because my pension has one up by 10%, so I have no personal axe to grind). Surely the Liberal Democrats should speak for everyone, hard working, lazy, deserving and undeserving. it is highly illiberal to adopt this “strivers/shirkers dichotomy.
All political parties seem to think that growth is good, and that they will get some, but none seem to have any idea what steps to take to achieve it. It’s like the underpant stealing gnomes in South Park https://www.youtube.com/watch?v=tO5sxLapAts.
My political programme:
Step 1 Get elected
Step 2 ?
Step 3 Growth
Step 4 spend proceeds of growth on nice things
The country is at a crossroads.Which way to go? Growth can come from developing new industry, re space projects.We are already successful on satellite construction.Rocket Blue Streak launched our 1st in 1971.A company is aiming to launch its 1st rocket next year from Scotland High tech jobs should be developed for a new era. Low wages for the young implies more COUNCIL homes for low rent to enable young families to develop with profits/funds to go to develop resources.We have an elderly growing population that will need carers in all areas of care be it technical or human.
Growth can come but people should also be able to be HAPPY in their jobs and lives. Dreaming of riches flash cars is a high aim.A positive attitude towards a new future has to be instilled with people for that happiness and aspiration to develop.The party should aim to show a future world not linked to thoughts of the past but a positive future.
This strivers/shirkers business is rubbish.It ignores the human factor of lifes problems.I am retired but support my even older relatives One with cancer one with dementia and volunteer.Children support their disabled parents .The list of others ‘doing things ‘is endless.Are they strivers or shirkers cos they are not ‘productive’?.They are words that instil env,y hate etc and keep the pot boiling.The party should aim to give apositive image for the future.
Governments don’t drive the productivity growth that enables improving living standards. They facilitate (or hinder growth) with the application of monetary and fiscal policies together with directed investment in education and training, social housing and public infrastructure and services.
One key area of tax policy that can facilitate growth is land value taxes. The OECD paper Brick by Brick: Building better housing writes:
“Relying less on housing transaction taxes and more on annual taxes on immovable property while shifting the base of these taxes from the value of structures to current land prices would bring multiple benefits. The move away from transaction levies towards recurring taxes would lower obstacles to mobility, facilitating labour market adjustment and boosting economic growth. Shifting the basis from the value of structures to current land prices would encourage construction in valuable developable areas, helping to address supply-demand mismatches. Many countries are underutilising recurrent property taxes and have substantial scope for increasing these levies, which provide local governments with a key and stable source of funds to finance local services, including in the area of social housing.”
Plaid Cymru MP, Ben Lake has been a member of the APPG on Land Value Capture. In contrast to the Conservatives and Labour he understands only too well the impact Brexit has had on food prices and the wellbeing of his constituents People can’t afford to eat because of Brexit – I’m sick of Westminster ignoring them
“Businesses and constituents inform me about the skyrocketing costs they are facing, and they are unequivocal that one of the factors contributing to this situation is Brexit.
The impact on our economy of being outside the world’s largest trading bloc is evident, but frustratingly, nobody in Westminster seems willing to address it.
Rishi Sunak has plenty to say about his plans to make the lives of refugees more difficult or the latest internal Tory psychodrama, yet he is silent on one of the main reasons behind the food inflation that is hammering communities across the UK – Brexit.
Research conducted by the London School of Economics suggests that UK households have shouldered a staggering £7billion in costs since Brexit, primarily due to trade barriers imposed on food imports from the European Union.
These barriers have introduced significant disruption to imports, resulting in an average increase of £250 in food bills”.
Economists generally isolate four main factors that drive growth:
Human capital – Highly skilled, educated and well-trained workforces have a direct impact on economic performance; as well as ensuring quality output, work will be more efficient.
Physical capital – Infrastructure – such as factories, transport links and machinery – reduces costs, facilitates international trade, improves labour productivity and increases economic output and efficiency.
Natural resources – These resources, such as land, energy resources etc., , can boost production capacity and therefore economies. Proper utilisation of natural resources by governments is key to this, and is influenced by skills and knowledge, availability of labour and technology.
Technology – Technological change and advancement significantly impacts economic growth, as new technologies have the potential to increase productivity and advance economies at lower costs.
Countries with advanced economies tend to have governments who focus on these four areas. As such, their economies perform markedly differently to countries with less-developed economies, where there may be an abundance of natural resources but where technological research and educating and upskilling workers is less of a focus. Factors affecting growth include: political instability; poor levels of education and health amongst a population; flight of capital; lack of infrastructure; and institutional frameworks.
The proper plan to grow the UK economy, create good jobs and tackle the cost-of-living crisis called for by Sarah Olney will address each of these critical factors.
The proper plan will address:
Human capital, ie education and training.
Investment capital – infrastructure, machinery etc.
Technology – create advances in tech? how?
Natural resources – land (more land?) energy (North Sea? Nuclear?..)
It all sounds very – erm – aspirational. I look forward to phase 3 – PROFIT!
Unless and until we recognise that people have good reasons for not working, then any idea of introducing a basic minimum income is for the birds. The shirker/strivers issue is one created by both Tory and Labour to create division between people. My experience, particularly in the 2010 election in Leeds Central was that this distinction has become ingrained. The most vehement about this issue are actually working class employed people on council and former council estate.
Are Liberal Democrats ever going to challenge this artificial division? People don’t do paid work for many reasons, including long term illness, mental illness, caring responsibilities, child caring/rearing, lack of suitable jobs, lack of appropriate qualifications to name but some. Very few actually don’t work because they want to.
Should we simply accept that not everyone will do paid work and that the vast majority of those not working will contribute in other ways to society? No more calling out people as lazy, or spongers.
In my 50 plus years in politics, lots of people have told me they know people who live in the lap of luxury on benefits, but they have never been able to introduce me to any of them. Why? “Oh, I don’t know them personally, my mate told me about them” or “I read it in the Daily Mail.”
If we are a party who wants to eliminate poverty and change the world, had we better not start with not demonising people?
The central tenet of Keynesian economics is that government intervention can stabilise the economy, according to an I M F Finance and Development.
Alas, “our” current government is doing the opposite as a look in combination at the increase in food bank usage, inflation and chronic underpayment of essential infrastructure personnel demonstrates.
Our current (democratic) government is aided in its anti-socio-economic activities by two powerful misconceptions:
1) Taxation has to pay for all governmental expenditure. It does not. Taxation contributes to governmental expenditure but its principle purpose is to make society stable and equitable and so reasonably fair and efficient. Without taxation, wealth polarises and necessary infrastructures shrivel, making society ever less fair and productive.
2) Inflation is a single entity which can only be controlled by increasing interest rates because they remove “excess” money from society. As the costs to power company consumers and the payments to power company shareholders show, inflation is not a single entity but affects different socio-economic groups differently. In practice high interest rates extract money from the not-so-wealthy but does not affect the (very) wealthy or benefits them. In short the raised interest rates takes money from debtors and gives it to creditors. Besides which, interest rate payments go to bankers but taxation, which could target excess money extraction, goes into the public purse.
I think one of the problems with interest rates, is that there is little real benefit to the government. Perhaps if the BoE base rate was more akin to VAT, a rate increase would have greater effect. Currently, a rate increase benefits the banks as only a small fraction of the increase is actually returned to the government due to the way the banking system leverages deposits.
@ Roland,
” I think one of the problems with interest rates, is that there is little real benefit to the government. Perhaps if the BoE base rate was more akin to VAT…”
I know what you mean. Interest rates go up and the money it has to pay out on bonds and other govt securities increases too. Which is the opposite of what happens when VAT increases.
@ Steve,
” Inflation is a single entity which can only be controlled by increasing interest rates because they remove ‘excess’ money from society. ”
As Roland has pointed out they don’t. If the Govt is paying out more it is adding money to society. This may not be immediately spent and so the effect of raising interest rates can have a short term deflationary effect but in the longer term it is reflationary or even inflationary.
@ Mick,
“The most vehement about this issue are actually working class employed people on council and former council estate.”
You’re right. They absolute are. They are of the opinion that if they can get out of bed early on a cold January morning to do whatever job they do then so should everyone else. In many cases they’ll be wrong in thinking this but in a few cases they’ll be right. It only takes a few instances of anyone ‘working the system’ for it to be brought into disrepute. This is why Lib Dems are whistling in the wind if they think that a commitment to unconditional social benefits is ever going to be a vote winner.
“Very few actually don’t work because they want to.”
That might read better as ‘because they don’t want to’. I think you’re right again. Therefore it makes sense to move to a system of providing more guaranteed work rather than more guaranteed benefits.
Jenny,
the government’s role in advancing technology is in funding and facilitating pure research and attracting investment into UK innovation. There is actually a UK Innovation Strategy
On natural resources – Efficient use of land and water resources together with the harnessing of wind, solar and tidal power in the transition to Net Zero as part of the greening of the economy and cutting of reliance on fossil fuels is a self-evident benefit.
The Profit or social benefits of economic growth are:
The long-term growth of a country’s economy has a positive impact on national income and employment rates, which in turn raise the standard of living
Extra tax income from increased economic activity can be used by governments to develop the economy further and reduce budget deficits
Economic growth can help to reduce poverty, though it cannot achieve this in isolation.
@Joe Bourke
“Efficient use of land and water resources”
Given the number of problems with water supplies in SE England in recent years efficient use of both land and water resources in that area might be a long way off.
https://www.bbc.co.uk/news/articles/cz78yrwg55no – apparently these problems have been going on for several days and not for the first time.
How practical is it to keep building houses and developing businesses in areas where fresh water supplies are not keeping up?
“Extra tax income from increased economic activity can be used by governments to develop the economy further and reduce budget deficits”
We’ve heard this kind of spurious argument for as long as anyone can remember. We’ve seen continual economic growth in the post war period, except for the occasional blip, up until the 2008 GFC. And, even though we all know what’s happened to Government’s deficit during this period we still keep hearing it. Why?
We also all know what happens when the government cuts back unnecessarily harshly to try to reduce it. I’d like to think that even George Osborne has realised his own mistake on that one.
Instead, why not take a look at the ‘problem’ from a different angle and ask if it is really such a problem at all?
Joe:
Economic Growth is “profit”.
I don’t believe your ideas lead to economic growth.. We’ve been doing many of them, and growth has flat lined for the last 15 years.
Jenny,
this FT article by Chis Giles is a good discussion of issues hindering UK growth since the financial crisis UK Budget: why the economy has grown so slowly
While recognising the impact of global external shocks there are three key areas cited :
First is Brexit, which raised import prices, generated uncertainty for business, raised trade barriers, complicated regulatory compliance and hindered the recruitment of workers.
The second is the tendency of government policy after 2016 to “flip-flop” from one idea to the next.
The third has been a rapid and unexpected deterioration in the UK’s labour market performance during the pandemic. Although companies are still able to provide more jobs to UK citizens than the European average, fewer people are now employed or looking for work than in 2019.
On top of these are longstanding issues that governments have failed to resolve over many decades. The UK’s planning and land-use system attracts much criticism for giving opponents to any development the upper hand and stopping growth.
Britain’s skill levels for those without university education lag behind those of other rich countries and for decades there has been a “long tail” of companies with poor productivity levels, which neither seem to improve nor go out of business. And the nation, much like the entire western world, is ageing rapidly.
Develop an economic plan to address these homegrown weaknesses and we might be able to get back on par with other developed economies.
Peter Martin,
the deficit in public finances was reduced from 9.9% to 5% of GDP during the coalition years. Not by spending cuts, but by economic growth and the associated increase in tax revenues that comes with it. The economy was growing at around 2.5% in 2014 and 2015 and unemployment had decreased to 5.2%. That growth rate was derailed after the Brexit referendum, but The deficit was recorded at 2.8% for 2020 just before the pandemic. That is at a level that would be considered compatible with an aim of reducing the debt to GDP ratio (to provide fiscal headroom for dealing with the next big economic shock that hits us) if economic growth was restored to the 2014-2015 levels.
@ Joe Bourke
Economic growth may well be a good thing but, as previously mentioned, it doesn’t affect the government’s deficit in the way you claim. As we have seen in the post war period, the deficit, both in absolute and relative GDP terms has increased as the economy has grown. The same has happened in the USA, so it’s not a particular failing of UK government.
The increase in the deficit you mention to 9.9% (although I thought it was more like 11% of GDP at the peak) following the 2008 GFC was caused by a change from net borrowing by the private sector, prior to then, to net savings afterwards. If everyone else is saving the Government ends up doing the borrowing in the same way as does a commercial bank when we place deposits. This is why it was sometimes referred to as a ‘balance sheet’ recession.
To discourage savings and encourage the resumption of borrowing there was a reduction in the level of interest rates in the post GFC period. This also can be seen to be way to reflate the economy in the short term. So more spending = more taxation revenue.
In the longer term the problem with this approach is that the level of private debt in the economy increases. If asset prices fall, particularly housing, then high levels of private debt turn into high levels of bad private debt which have the potential to cause another 2008 style crash. This is where we’re at presently.
To whom is the government deficit owed, by when and under which terms?
Is there one single deficit or an aggregation of smaller deficits?
@ Steve,
In the short term it is owed to the Bank of England which facilitates the government with an unlimited “super platinum” credit card, aka the ‘ways and means’ account. In the longer term the debt is then owed to anyone who buys government bonds and securities. These could even be Premium Bonds or even National Savings certificates purchased by you and I.
It is surprising how little this is understood by the general public. There are some crazy ideas out there. The worst of which is that the Rothschilds control the world’s money supply and therefore the world’s governments. Supposedly they are told what they need to do to get the loans they need. Deliberately keeping everyone in the dark about the workings of our financial system only serves to promote anti-semitism.
“…. households have shouldered a staggering £7billion in costs since Brexit, primarily due to trade barriers imposed on food imports from the European Union.
We are meant to have a FTA with the EU. If there are trade barriers (presumably no-tariff barriers?) in either direction we should be working to remove them. Rejoiners are quite happy to spread the idea that UK food inflation is solely down to our leaving the UK. They don’t seem to be aware that EU food inflation was running at 19% pa earlier this year.
https://www.statista.com/statistics/680184/inflation-rate-food-in-european-union-eu/
On the question of tariffs, and food imports generally, many Lib Dems want it both ways. They’ll object to a FTA with Australia as a bad idea, for example, because they say cheaper food imports will adversely affect our own agricultural sector. Then they argue the complete opposite in saying that cheaper food from the EU is a good thing because it keeps our shopping bills down.
These are the pros and cons of the issue on which any government will need to find some sensible compromise. We can’t have all the pros and none of the cons!