Making use of the slowest news month of the year, the Labour party has released details of a report which (shock horror) has shown that living standards have fallen as a result of the financial crisis and subsequent recession.
Of course, they don’t put it quite like that, choosing to blame the coalition rather than the bust they promised would never come. Here’s Chris Leslie, Labour’s shadow financial secretary to the Treasury (presumably Balls is on holiday…):
David Cameron will go down in history as a disastrous Prime Minister for people’s living standards. He is totally out of touch, his economic policies have failed and the result is working families are massively out of pocket.
By 2015, official forecasts show working people will have lost an average of £6,660 under five years of the Tories. Yet millionaires have got a huge tax cut from this Government.
Of course, this is a serious issue. Times have been incredibly tough for a very large number of people over the past few years. But falling living standards are a symptom of economic problems, which of course preceded the coalition. The fall in living standards since 2008 serves primarily to highlight just how disastrous Labour’s economic record is, not only having failed to “abolish boom and bust” but doing the very reverse by engineering one of the biggest booms and consequently biggest busts in the developed world.
And how much worse would things would have been had it not been for the stabilising effect of the coalition’s balanced programme of deficit reduction combined with monetary activism, both of which have kept interest rates at record lows? It’s easy to forget that even small increases in interest rates bump up mortgage payments significantly.
And thanks to the Lib Dems, those on the lowest incomes are keeping significantly more of the money they earn. Combined with other measures such as freezes to council tax and fuel duty, the coalition has actually done a lot to help those trying to make ends meet.
Whoever was in power now would have been faced with falling living standards — recall former Governor of the Bank of England Sir Mervyn King’s warning before the 2010 election — but the problem is one largely of Labour’s making thanks to their reckless economic policy. The coalition might not (yet) have been able to reverse the trend, but they have done a number of things to help. However, only a sustained and sustainable economic recovery will deliver a turnaround in living standards – so today’s further good news on that front has to be welcomed.
* Nick Thornsby is a day editor at Lib Dem Voice.
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40 Comments
falling livcings tandafds are caused by inflaon-its entirely predictable that it has happened-labour want furtehr stimulus which creates frutehr inflaiton and further shorter term falls in the standrd of living -they havent gotbthe economc coherence of a six year old
Oh blah blah blah. Change the MP3.
@ david thorpe “they havent gotbthe economc coherence of a six year old”. You don’t do irony do you? lol
All 3 parties have been doing neo-liberalism since 1979; there has been an unprecedented squeeze on wages, while the coalition specifically have created the conditions for increased unemployment and more precarious employment in order to generate a reserve army of the unemployed to maintain that downward pressure. It was pretty obvious that the Tories would throw the lower & middle middle classes ( who are after all still working class, really ) under the bus this time, as they did with the industrial working classes, particularly miners, shipbuilders, etc in the 80s.
Oh, I’ve got it all wrong? A big boy did it and ran away? In 2010 the economy was growing; as soon as coalition policies kicked in that stopped, and it’s been flatlining since. This is a political choice – notice that austerity particularly applies to social security ( in the non – financial sense ) and to the reproduction of society – health, education, etc.
Here we are doing some routine Labour bashing yet again. We don’t do routine Tory bashing. We are, of course, equally ready to work with either party next time around, with the help of a battalion of flying pigs.
@ David Allen – “We don’t do routine Tory bashing.”
It’s just possible, David you see only what you want to see… Eg, https://www.libdemvoice.org/tory-rebels-launch-their-own-alternative-queens-speech-as-helpful-reminder-of-why-lib-dems-vital-to-cameron-35014.html.
@Stephen Tall
I think the headline of the article in your link, referring to “tory rebels”, means that it is not bashing the conservative party, just its lunatic fringe. Can you find one where LDV bashes the more mainstream Cameron/Osborne brand of toryism or is that too close to home?
Any chance of agreement on a date when this party can grow up and drop the its all labours fault line?
For a party that claims to be serious about government its very tiresome and a very poor defence of a pretty dire economic position still – glance back at Osbournes forecasts and think about that instead.
What Peter Watson said.
If the nearest thing to Tory-bashing you can come up with is “Helpful reminder of why Lib Dems vital to Cameron”, well, words fail me, I am falling about giggling!
The Labour position is no more than a change in electoral tactics as the economy begins to show signs of recovery. As Nick notes this is a serious issue and one that requires a clear policy directon to ensure that economic growth directly benefits those most in need.
The recent report of the Commission on Living Standards warned that millions of households are heading for a long period of stagnant living standards unless bold steps are taken to ensure that growth over the next decade is broadly shared. Even with a return to steady growth, it’s now entirely possible living standards for a large swath of low and middle households will be no higher by 2020 than they were in 2000.
The Commission recommended a range of steps to boost employment income in low to middle income households in a constrained spending environment. The recommendations are fiscally neutral and set out both a long-term direction of travel and practical first steps.
To support employment among parts of the workforce that have grown in importance, particularly women and older workers, by building pro-employment public services. The Commission recommended major new investment in childcare, providing three days a week of childcare to working parents with young children for £10 a week. And, to support employment among older people who may otherwise need to leave work to care, the Commission endorsed the recommendations of the Dilnot review.
To ensure that the tax and benefit system supports employment, the Commission recommended reforms to reflect modern working patterns. These recognise that today’s workforce contains many people making marginal choices, for whom incentives are vital. The Commission argued that:
Parents should receive relatively more cash support when their children are young and relatively less once they start school, when more want to work;
Dual-earning couples should be better supported under Universal Credit by giving second earners the same rights as first earners, allowing them to keep the first £2,000 they earn;
Older workers should be rewarded for staying in work longer by raising National Insurance thresholds to £10k for those over 55, paid for by means-testing universal non-pension benefits as part of a new, pro-work settlement with the older population.
To combat low pay, the Commission argued for the need to go beyond a minimum wage to a genuine low pay strategy. As a first step, the Commission recommended that the Low Pay Commission be given a broader remit, including a new role of judging which sectors of the UK economy could pay an “affordable wage” above the legal minimum. This would be backed with new efforts to change pay norms, including a requirement that publicly listed firms report the proportion of their workforce paid below the Living Wage.
To renew skills policy for today’s polarising labour market, the Commission recommended new steps to raise demand for skills, including the establishment of new sectoral skills institutions. And, to boost skills supply in the areas that matter most, the Commission argued for a shift away from focusing on outcomes at 16 to outcomes by 18, arguing that the raising of the education participation age to 18 should be backed with a new standard leaving exam at age 18.
To pay for its recommendations, the Commission pointed to several possible sources of revenue. It argued for the lifetime allowance for pension tax relief to be reduced from £1.5m to £1m, for universal non-pension benefits to be means-tested, and for employee National Insurance Contributions to be applied past the state pension age.
Both the Tories between 1979 and 1997 and Labour between 1997 and 2010 found ways of boosting the living standards of the people of the UK beyond the level that the productivity of the economy could sustain in order to win votes. The Tories cut taxes using revenues from North Sea oil and the sale of the public utilities, and Gordon Brown sold gold reserves, taxed pension funds, cut personal taxation by shifting to stealth taxes, and borrowed. Had the LibDems been in power Vince Cable might have reined things in a bit – he was warning for years in advance of the crash that the level of personal indebtedness was at dangerous levels – but all parties in power want to get re-elected, and telling people that their standard of living is too high probably isn’t the best way to ensure electoral success. We have had 30 years in cloud cuckooland, and we are now having to face reality. But don’t expect our politicians to admit that.
The party’s proposed approach to this issue is set out in the confence paper to be debated at Glasgow A balanced working life:Policies for Low and Middle income households.
The paper takes on board much of the recommendations of the low pay commission observesving that times are tough. Since the financial collapse of 20 08, we have all felt our household budgets squeezed and many people have had to make sacrifices.Many of us look to the future in the hope that a renewed period of sustainable economic growth will bring thestandard of living we want for ourselves and our families. However, there are too many individuals and families in the United Kingdom for whom this currently feels unachievable.Working as part of the Coalition Government, Liberal Democrats have introduced policiesaimed at making life more manageable for this group of people. The authors of this paperare proud to endorse the work Liberal Democrats within government have done to improve people’s lives:
•Raising the personal tax allowance to £10,000.
•Extending the offer of free child care and contributing more widely to parent’s childcare costs.
•Freeze on fuel duty.
•Getting a fairer deal for energy users.
•Extending the right to request flexible working to everyone.
However, despite these undoubted advances, the austere times in which we live meanthat families are struggling to get by and people are hurting. Having talked to a range of experts, and carefully considered a wide range of written and oral evidence, we have identified four key areas where we felt people on low and middle incomes – especially
those trying to juggle their work and caring roles- could use the most help:
•Household Budgets.
•Childcare and Other Caring Commitments.
•The Workplace and Employment Protection.
•Family Friendly Public Services.
I fully concur, with tonyhill’s comment.
@Peebee
“Any chance of agreement on a date when this party can grow up and drop the its all labours fault line?”
If that’s a serious question, then a sensible answer could be: “When Labour accepts its share of the blame for the financial predicament we are in.”
Is that fair?
I will start with some Tory bashing for those that like that sort of thing. The Tories are afraid to release membership figures because they have fallen below 100,000; they are split on Europe, Equal Marriage etc Its only a few months since they were panicking about UKIP.
For Labour, the campaign on living standards is the last throw of the dice. They have lost the argument on The “Cuts”, The Economy & who was more to blame for the Crisis. There are long-running Polls on all 3 areas & on all of them the figures have continued to move against Labour. Perhaps because of those shifts Labours Polling average has fallen 4% since February, another few months of that & their MPs will start to panic.
Paul barker
Which party is benefiting though.
If those paltry comments are the only criticisms you can make of the Tories then it confirms some of the posts above . The LD are just ‘th
Oops
Meant to finish with ‘National Liberals’ all over again
@Simon Shaw “When Labour accepts its share of the blame for the financial predicament we are in.”
I think the key thing here is “its share“.
Between the poles of “It’s all Labour’s fault” and “It’s all the banker’s fault” it is surely a much more complex situation than the tribal shouts of yah-boo-sucks allow for. Since tories and Lib Dems promised to match Labour spending plans, and tories (and perhaps the economically liberal wing of the Lib Dems) would not have regulated bankers, then would the economic situation really have been different if the 1997, 2001 or 2005 elections had returned today’s LD-Con coalition? In The i today, Labour MP Geraint Davies wrote, “Only a third of the 2010 deficit was due to Labour investing above earnings to keep the economy moving, with two-thirds caused by the bankers.” Is that Labour’s share of the blame?
@Peter Watson
“Is that Labour’s share of the blame?”
Probably so, if you add in New Labour’s cosying up to the city and failure to regulate the bankers.
Alistair Darling’s competent hand had the economy growing. In a growing economy the rise in the cost of living matters little because incomes rise to match it. The LibDems, in government, switched to backing Osbourne and his total incompetence. Because of this the economy stopped growing and because the LibDems sat idly by the lack of growth and the clueless austerity agenda fell hardest on the poor.
It is this that has tanked living standards not the crash that has Gordon’s fingerprints on it.
I believe in financial circles the growth ‘under Alistair Darling’s competent hand’ is commonly known as a dead cat bounce.
@ Tony Hill. Spot on. The only reason we are not in the same state as Greece or Spain is because we are not in the Euro.
@ Jack. Labour say that the crash happened because of events outside the UK (nothing to do with us gov.) and that a recovery can be created despite what is happening outside the UK. I don’t think so, on both counts. Everything has an effect.
The sad thing is that Osbourne’s “Help to Buy mortgage guarantee” is a repeat of what Labour did in the housing market to win in 2005 and we are supporting it. If you must to do it, why not have a stabilizer reducing the guarantee as prices inflate ? House prices are already too high.
Ha! Is this some kind of joke?
Yes, it’s quite correct to say that Labour never abolished boom and bust. It’s also quite correct to say that the Liberal Democrats as part of the coalition government are doing nothing to prevent the re-emergence of the conditions that result in bust – in fact, Help To Buy is explicitly intended to create a bubble.
And while it is true that incomes have broadly fallen over the last five years, the IFS has recently reported http://www.ifs.org.uk/comms/r81.pdf that those on the lowest incomes have seen the biggest reduction in incomes while the richest have both seen tax reductions and smaller percentage gross income loss.
Why aren’t you criticizing Osborne for the “unfair” policies that he is implementing?
If the bedroom tax does not help to make lives more difficult, then what does?
Instead of all the constant bashing of the Labour Party, why not try to resolve the situation. Get your Lib Dem councils building and resolving housing issues.
I don’t personally feel you can blame the Labour Party, the banks have had a hand in the situation. The public purse can not fund everyone’s mistakes.
@ David Allen, Peter Watson, et al.
LDV has a search function, which I suggest you avail yourselves of rather than ask fellow readers to bring the ‘Tory bashing’ links to you. For starters I suggest searching for ‘Bill le Breton’.
The problem with the yah-boo sentiment of the headline is that it invites an inspection of the Lib Dem position whilst Labour were in power. The truth is that monetary policy is no longer democratic and therefore irrelevant to party political debate unless one of the parties makes a point of returning democratic accountability. As we all know, fiscal policy between the three parties was in a agreement with the slight exception that the Lib Dems wanted to increase taxation and spending in 2005. So, on what grounds do any of the three parties have room to criticise any of the others? You were all complicit.
The biggest mistake Labour made with regards to the economy was to allow the massive house price bubble based on the unsustainable private sector debt bubble – the worst of which was over a decade ago now seeing as house price inflation peaked in 2002. The coalition’s help-to-buy policy is deliberately designed to do the same thing. Labour were incompetent in allowing the City to inflate house prices whereas the coalition is deliberately using government intervention to prop up prices. That makes you far more complicit in my book.
“commonly known as a dead cat bounce.”
While the coalition policy is just known as a “dead cat”?
To be honest, once Gordon and Tony’s policies finally killed the cat, Alistair really had no chance of resuscitating it, and George Osborne is on average about as bad,
Vince has understood the problem much longer that any of the others, but sadly is not in charge. If he was, he really could start to make a positive difference.
@ Jack
“Alistair Darling’s competent hand had the economy growing.”
Why bother repeating that when we know any “growth” was only as the result of expanding government borrowing unsustainably past 11% of GDP a year?
The “Labour had the economy growing” argument has been shown to be utterly bogus.
To be more constructive, however, I would say that falling living standards are NOT the fault of Labour. Or not entirely at least.
While there are problems like high consumer indebtedness and a massive deficit that were created by Labour and are limiting potential GDP growth, the much more important factor is that the UK, along with other developed economies is struggling to make its claim to increasingly scarce world resources in terms of tradable commodities.
What’s put the squeeze on living standards has been higher food and energy prices plus the end of price falls in imported consumer goods. That, plus the fact we are importing masses of new workers from the rest of the EU and elsewhere, driving down wages.
The only answer is to become a high skilled economy, with production to match our ambitions as regards consumption. I think we’ve finally begun to do this, thanks in large part to many of the things Vince Cable is doing, but we need to do more, much more, to secure the UK’s place in the world.
This should be the message to take into the 2015 election: Britain’s economy needs radically overhauling and re-engineering and the Lib Dems alone have the policies on training, investment and industrial policy to do this.
This article is the worse I have read here. In case Nick Thornsby has forgoten the economic bust was not caused by Labour it was a worldwide event caused by bad loans in the USA. This is not to say that Labour was perfect in running the ecomony. Nick also ignores the fact Labour took both monetary and fiscal measures to stimulate the economy. He also ignores the fact that the coalition removed the fiscal stimulus and applied a fiscal deterrent and replied on monetary policy alone. Lord Adair Turner believes that monetary stimulus has diminishing returns.
I think Nicks knows he is on thin ice because he has given no links to either the article where Chris Leslie made his claims or to where the evidence is.
http://www.ibtimes.co.uk/articles/496941/20130806/david-cameron-labour-party-chris-leslie-ed.htm
http://www.ifs.org.uk/comms/r81.pdf
According to the Institute for Fiscal Studies median Income rose between 2007-08 and 2009-10 and fell between 2009-10 and 2011-12 and mean income rose between 2007-08 and 2009-10 and fell between 2009-10 and 2011-12.
@ TonyHill 7.49pm on 6th and @ RC 9.44am on 7th
Both hitting the nail on the head. Living standards have risen since WW2, in part, by asset stripping and borrowing. The recent programme on BBC2 “Das Auto: The Germans, Their Cars and Us” sets out why we are not a high skill economy. The Germans started with no rooves on their factories and inferior products, while our factories were at full capacity exporting to the world. Where are we now and why ? Brown and Osbourne are part of the problem – not the solution. Neither Labour or the Tories have the solutions they represent more of the same. Vince is helping steer us in the right direction.
We should be taking this message into the Euro Election next year as well. Running away from Europe won’t solve our problems.
@Richard Shaw
Happily I did not even have to search 🙂
In the interests of balance I would like to quote from an article this morning by “The Voice” (https://www.libdemvoice.org/lessons-of-coalition-9-what-do-the-lib-dems-need-to-learn-from-the-first-3-years-35631.html): “The Tories remain the nasty party of British politics. We expected them to be nasty (though I have to say they exceeded my expectations – Iain Duncan Smith’s welfare policies are poisonous, and the Home Office’s racial targeting of immigration “offenders” is unspeakable). We did not expect them to be as incompetent as they have been. They are not the party of safe hands that they claim to be. Labour will be just as incompetent from time to time (and so will we be): it goes with the territory.” More articles like that to balance Nick’s article above, and we will have a more credible claim for equidistance. Unfortunately though, Clegg/Alexander/Laws seem to have warmed to the whole Punch and Judy show of government vs. opposition which I think leaves a hostage to fortune if a Labour – Lib Dem coalition is feasible after 2015.
Hugh,
I saw the programme on BBC2 “Das Auto: The Germans, Their Cars and Us” . The presenter, Domonic Sandbrook, emphasized that the problems of the 1970’s were a sympton (rather than the cause) of the loss of competitiveness that occurred in the fifties and sixties. German, French, Italian and Japanese manufacturing had retooled and prepared the ground for establishment of dominance in European and US export markets, while the UK relied on exports of notoriously unreliable cars to the commonwealth.
In 1972 UK car production peaked at 1.92m vehicles. British Leyland suffered a series of infamous financial and industrial relations crises, being effectively nationalised after a multi-billion pound government bail-out in 1975.
In the 1980’s. UK car production fell below 1m units, halving production in a decade, as the car industry reached its nadir. Production hit a low of 888,000 vehicles in 1982. British Leyland finally disappeared as a name from UK car manufacturing.However, with new enterprise zones, better industrial relations and government support, green shoots started appearing. In July 1986, Nissan became the first Japanese car maker to set up a production facility in Europe when it opened a new plant in Sunderland. Peugeot started production at Ryton, in the Midlands, the same year.
In the 90’s, although Rover Group, the last mass British-owned car producer, was sold to German BMW, Toyota opened a new plant near Derby and production continued to rise. Volkswagen took over Rolls-Royce and Bentley in 1998 and Ford launched the hugely successful Mondeo which was manufactured at its Dagenham plant. Ford took over Jaguar in 1989 and the car industry as a sector started motoring again.
MG and Rover were sold to the Phoenix Consortium in 2000, which concentrated all production at Longbridge. Rover Group went into administration in 2005. Ford sold Jaguar Land Rover to Indian group Tata Motors for £1.5bn in 2008, but plunged into problems within a matter of months. Tata asked the UK Government to guarantee a £340m loan from the EIB, but, the Government’s tough terms, in discussions led by Lord Mandelson, caused the protracted talks to collapse. Tata walked away, but loans were secured in early 2010 with backing from Indian and European banks.
Today, more than 700,000 UK jobs rely directly on the automotive industry, with Nissan the largest manufacturer of cars in the country and all mass-produced car plants under foreign ownership.
I concur with your conclusion that “We should be taking this message into the Euro Election next year as well. Running away from Europe won’t solve our problems.”
Nick Thornsby: Quoting Chris Leslie: “David Cameron will go down in history as a disastrous Prime Minister” – couldn’t agree more. Doesn’t mean I don’t agree that Labour contributed to the mess. It’s just that until all three parties stop playing the neo-liberal game, all three will be held in utter contempt by a large part of the electorate.
“And how much worse would things would have been had it not been for the stabilising effect of the coalition’s balanced programme of deficit reduction combined with monetary activism, both of which have kept interest rates at record lows?”
Oh that’s all right then – our consciences are clear. Sorry to mention food banks and low incomes again or indeed the savaging of and continual ‘revolution’ in public services… nothing to do with us gov, I presume?
The Resolution Foundation research showed incomes failing to keep pace with the cost of living from 2003 onwards. The cause is not as Nick suggests.
A large number of remedies are suggested.
Peter Watson,
I’m afraid I think you’re being far too kind to LDV. It’s true that LDV accepts opinion pieces from individuals like Rob Parsons who aren’t unwilling to criticise the Tories. It’s true that LDV also employs some editors, Caron Lindsay for example, whose brand of loyalism is far from unconditional and who clearly speak their minds when the Coalition does something specific which they don’t like. All this provides a veneer of openness, which may convince some that the Party still retains its principles.
However, the hard core loyalists like Stephen Tall and Nick Thornsby echo Clegg, Laws and Alexander in adopting the Punch and Judy style you rightly describe – Regular attacks on Labour, total solidarity with the Conservatives on all their main policies. It’s George W Bush politics. Bush spent years making it an iron rule never to speak of Saddam Hussein without repeating the false claim that Hussein supported Al-Qaida. Result, most Americans came to believe the false claim. For similar reasons, many Britons now believe the regularly repeated false claim that the 2008 crash was all Labour’s fault, despite its obvious international origins.
If you’re a Tory, that’s quite a natural style. You are basically there to fight off the Left by any means that will work, and thereby keep the middle class comfortably off. Your voters probably quite approve of your robustly dishonest style, as long as it achieves success.
However, potential Lib Dem voters want to see the country governed well. Basing government policy on a lie is not likely to work well, as Osborne has found. He made depression worse by threatening huge cuts, driving down confidence, simply to over-dramatise Labour’s supposed economic failure. Sensible voters will not have been impressed.
Furthermore, repeatedly trashing one opponent while treating the other with kid gloves inevitably means that we cannot possibly be seen as equidistant. Nobody can expect us to be equally capable of working with either side in the next parliament. The leadership and loyalists seem to treat this elephant in the room as if it were a trivial issue, as if we could easily turn around suddenly and embrace Miliband without any problems or loss of credibility, should we ever decide we needed to. Why are they acting in that way?
I don’t think they have failed to recognise the elephant. I believe that the Clegg gang are determined to recreate the Con – Lib Dem coalition after 2015, if they can possibly do it. I believe Cameron would like that too. I don’t believe they have any intention of touching Labour with a bargepole. I think Clegg is weaselling about all this because he would prefer to string along his activists by soft-soaping them, rather than admitting his real aims and provoking resistance to them. It’s the only explanation that adds up.
@David Allen “Britons now believe the regularly repeated false claim that the 2008 crash was all Labour’s fault, despite its obvious international origins.” Yes the crash did happen internationally. The point is that Gordon Brown’s actions as Chancellor made the crash worse in the UK. He allowed Northern Rock to make 125% mortgages and allowed RBS to take part in the buy out of AMB AMRO. I do not have a degree in economics but I thought, at the time, that this was wrong and so did other non politicians I spoke to. Curiously when I asked a Cambridge educated Economist he could see nothing wrong.
Labour are “fair weather” Keynesians. They say his principles should be applied in a slump, but stoke booms for political advantage. At the Birmingham conference prior to the coalition agreement Vince told us that the country was in a much worse mess than any of us realised. I think he was right and that Labour are still in denial. Yes Labour have a point about falling living standards for people on low incomes. And no I do not agree with everything that Osbourne has done. We are in a coalition ! My choice for after 2015, if there is no majority LD government, would be a coalition with Labour. But not with Balls as Chancellor.
The public has been spoon fed short term solutions so I am expecting a Labour majority though.
Looks like many reactions here can be summarised as ‘Liberal Democrat Website causes shock by not supporting Labour.’ Interesting expectations.