Let’s have rising living standards

 

According to the Office of Budget Responsibility, real wages will be rising from 2013-14 onwards. For the current financial year they forecast a 3.9% increase in wages and salaries, compared to a 2.7% rise in the CPI inflation measure and a 3.2% RPI increase. In the next few years they also anticipate a useful positive gap between wage growth and price rises.

As Alastair Heath has recently pointed out, there has been no transfer of income from wages to company profits. The squeeze has come from higher taxes on employment, so government has been the “winner” and people on wages and salaries the losers.

Maybe the Labour party does not believe these forecasts. Or maybe they just  needed to say something  different when the economy started to grow, disproving their pessimistic past forecasts about the impossibility of recovery. They lighted on the continuing squeeze on living standards that had been at its most intense during the Great recession in 2007-9. It may just be a short term campaign, which they will end as wages rise and real incomes go up.  The problem for them is that once again their forecasts of gloom will look poor if the OBR is correct and real wages do now start to rise.

The government should not be complacent. People want a recovery. They are more inclined to trust the government than the opposition on the big arguments about debt and deficits. They agree with the Coalition approach that reform is needed to make work pay, and action has to be taken to stop debt spiralling out of control.  They also understandably want the squeeze on individuals and families to come to an end. If work is to be worthwhile, it is easier to accept the work discipline if there is a good prospect of earning more  and being able to spend more next year than this.

Quantitative easing and ultra low interest rates have favoured borrowers at the expense of savers. They have helped the highly leveraged company, not the strongly  financed group. They have tended to help the young where they borrow and hit the old where they have deposits, help the spender and hinder the saver. The government needs to show how it is going to balance things a bit more. The savers deserve some reward as prudence should not be a crime. The hard working families the governemnt likes to talk about want a vision of how they can participate fully in the wealth of the nation and the growth of the economy.

Ministers should dust down ideas for wider ownership. As the economy grows so more profit will be made and more assets will go up in value. This needs to be a process which enriches the many, not just the few. I will look at more ideas in future blogs on how this can come to pass.

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82 Comments

  1. lifelogic
    Posted December 12, 2013 at 6:20 am | Permalink

    You mention “ultra low interest rates”

    But the only people with ultra low interest rates are savers and a few borrowers with some old loans (with low margins agreed before the crash and still running). Nearly all businesses are now paying the banks large margins often 6%+ Libor and fees on top. A few owner occupied mortgages can still be reasonable too at more like base +2.75% average but not much else.

    Many SMEs are still often being ripped off, if indeed they can find any lenders at all this will get worse are rates rise.

    A forecast of a 3.9% increase in wages and salaries, compared 3.2% RPI increase (actually far higher for many), together with increased taxation is hardly anything to offer to voters, after such a long squeeze on the private sector. When will the government do something to let the private sector earn the 50% more that the state sector already gets? This 50% more is all paid off the back of the private sector workers, depressing their standards of living with high taxes, while undercutting their wages with cheap labour from abroad at the same time?

    You say “This needs to be a process which enriches the many, not just the few.” Indeed so we need cheap energy, no green crap, less EU, lower taxes, simpler taxes, selective immigration, functional banks, a better, cheaper and fairer legal system, a much smaller state sector, a sound currency, some public services that are not a complete joke, fewer regulations, a level playing field in transport and fairness between the state sector and the worker bees they feed off. Alas we have Cameron/Clegg think instead with idiocies like wind/PV subsidies.gender neutral insurance, HS2 and Miliband appearing on the horizon under 18 months off.

    Thanks for wasting the huge open goal presented to you Cameron. Promises from this ratting government over what they will do after 2015 are irrelevant, they have clearly given up for a few terms at least. Miliband will be worse but not very much.

  2. Mike Stallard
    Posted December 12, 2013 at 7:02 am | Permalink

    I am an OAP with a tiny pension.
    “This needs to be a process which enriches the many, not just the few.” (More people=more votes)
    I wonder about that myself. The problem really is that there are some wealth creators and others who help them and yet others who work for them and, I regret, others who are bone idle or full of vice.
    Then there are others who are bringing up children, or looking after the sick, or keeping us safe, or sitting behind computers, or fussing, or making loads of laws which nobody either needs or wants…
    It is so varied! Money rather sorts it out – or has done. The Churches once sorted out the caring bit, including the schools.

    The problem today is that the wealth creators are mainly Chinese or Russian as far as I can see. And they can be very grasping and greedy. I am terribly worried about the Americans what with the banking scandals. I am not sure that the ethical Edwardians are still around much.
    The Christians who used to look after the poor and disadvantaged went about 20 years ago, leaving the door wide open to the often uncaring and inefficient State.

    Just moving the “vulnerable” to the front of the queue encourages vice and opens the door to fecklessness. Just offering money to bribe people to vote for a party leads to bankruptcy.

  3. Mark B
    Posted December 12, 2013 at 7:55 am | Permalink

    John Redwood MP said;

    “As the economy grows so more profit will be made and more assets will go up in value.”

    Just don’t expect a thank you letter from the Chancellor Ed Balls post 2015, that’s all.

  4. margaret brandreth-j
    Posted December 12, 2013 at 8:13 am | Permalink

    Quite . I am just looking for a job which pays £66.000 PA. Every time I achieve or get another qualification I am sponsered,put down and then the money paid for me is halved. That is private intervention and the greed of the employer.
    Lets hope ( and that is theme of a new song I heard this am) that life treats everyone well.

    • lifelogic
      Posted December 12, 2013 at 3:51 pm | Permalink

      It is not usually “the greed” of the employer perhaps just the desire of the employer to remain in business and have sufficient profits to be able to expand.
      In business one competes or dies. Unlike the state sector where one can do nothing of any use (or worse) for years on end and no one cares a dam.

    • A different Simon
      Posted December 12, 2013 at 5:16 pm | Permalink

      Margaret ,

      How about a job as a Met Police Sergeant ?

      Or a backbench MP . Over £100,000 a year when you include the pension .

      Reply Hardly!

      • zorro
        Posted December 12, 2013 at 6:43 pm | Permalink

        Met Police Sergeants do not earn anywhere near £100,000 grand a year!

        Nor do MPs unless you count their expenses and other allowances or the or their second or third jobs……

        zorro

        Reply The main e3xpenses claimed by MPs pay the salaries of their staff. We do not add other staff salaries to the “pay” of other executives.

        • A different Simon
          Posted December 13, 2013 at 12:03 pm | Permalink

          Zorro ,

          Margaret was asking about a job which pays £66,000 a year so I suggested Met Police Constable . The basic may be in the mid £40k’s but depending on how you value the define benefits pension the total package can be in mid £60k’s .

          My point is that stating the gross pay rather than the total package is disingenuous to the masses who guarantee defined benefits pension yet have to bare the risks of investment under-performance and reducing annuity rates for their own .

          The pension is not as generous as it used to be when Neil Record wrote “Sir Humphreys Legacy” and early retirement on spurious medical grounds and promotions on the last day of service to exploit the then final salary nature of the pension are thankfully no more .

          I support good pay for police because nobody wants them supplementing their income . Just think it is ungrateful and insensitive when the recipients of these fine pensions can’t even acknowledge them as part of the package .

        • A different Simon
          Posted December 14, 2013 at 9:15 am | Permalink

          I didn’t say met police sergeants are earning £100k .

          The met police sergeant suggestion was in reply to Margaret’s request for a £66,000 job ,

          If you take a basic in the mid £40k’s and add the true value of the benefit of the defined benefit pension you get end up with a total package in the £60k’s .

          Public sector unfunded defined benefits pensions are using a discount rate of inflation plus 3% where the value of an investment is guaranteed to double over 24 years .

          Ordinary people can only get an inflation linked return of inflation +0.7% on index linked gilts which will take 103 years to double .

          Why should the Govt give it’s workers a 4 times better return per annum on their investments than it gives to everyone else ?

          To get 3% return above inflation over the long term an investor has to take significant risk .

          For fairness perhaps state sector pensions should use a rate of return comparable to corporate bonds like pensions in the private sector of around 2% after inflation .

          It is disingenuous and insensitive for recipients of defined benefits pensions to neglect to mention pensions benefits when stating how much they earn .

          Quite frankly if that is the level of gratitude they can show the masses for guaranteeing their level of income in retirement then they don’t appreciate their pension enough and the schemes should be shut down .

          • zorro
            Posted December 15, 2013 at 7:49 pm | Permalink

            Pension contributions are going up in the public sector, and private pensions were a lot better until a certain James Gordon Brown botched them! A lot of private sector people used to mock people with their little (on average) pensions in the public sector….Not so much mocking nowadays mind you…. However, I have never really trusted pensions and have preferred to save and invest in other ways. Buying annuities and losing the capital is when you pop your clogs is a bit of a mug’s game…

            zorro

      • A different Simon
        Posted December 13, 2013 at 7:25 am | Permalink

        Very easy to poo poo when you are the recipient of a defined benefits pension John .

        For the rest of us could you at least include an item in the inflation basket for “rate of saving for making provision for old age” please ?

        Given the way returns on investment and annuity rates have gone , what shall we set it a £10,000 per year to start with ?

        Ten years ago it might only have been £5,000 p.a.

  5. Narrow Shoulders
    Posted December 12, 2013 at 8:21 am | Permalink

    The 3+% wage increase figure includes increases awarded to those at the top of the economy whose share of the national income continues to rise. Those of us in the real world will not see anything like that size of increase especially while your government allows cheap labour to be imported by the likes of Dominoes pizza.

    Those imported workers are also contributing to increased housing costs which are not recorded in rpi.

    Add heating costs to this equation and consefvative MPs would do well to be a bit less satisfied with themselves. The workers are suffering out here.

    • zorro
      Posted December 12, 2013 at 6:44 pm | Permalink

      Indeed, I can see John standing against a lamppost reading out those statistics…..

      zorro

  6. lifelogic
    Posted December 12, 2013 at 8:27 am | Permalink

    If the wages ever do rise by this pathetic 0.7% above inflation then after tax & NI that might well be just £125 PA in hand for an average worker. But Cameron with his other hand also pushed back the state pension age for many by 2 years (and made many other tax increases too). This pension change also will cost many about £12,500, so it will be 100 years work just to make up for that tax increase. (Oh and anyway it will surely be means tested by the time you do get to that age).

    Do Osborne and Cameron expect any gratitude or votes for this great 0.7% pay “achievement”, after four year of over tax, borrow, regulate and waste?

    • Hope
      Posted December 12, 2013 at 8:56 am | Permalink

      Not if you are an MP.11 percent plus perks and you do not have to attend work and it is only part time.

      • behindthefrogs
        Posted December 12, 2013 at 11:58 am | Permalink

        First rise for five years of 11% amounts to 2% a year. In addition they are being asked to pay more towards their pension and having their expenses curtailed further. Presumably their secretaries and other staff will expect a rise.

        11% seems far too little to me.

        • lifelogic
          Posted December 12, 2013 at 5:32 pm | Permalink

          The more you pay for MPs the worse on balance, the quality you will get. People who do it for the money and just want to keep their jobs and so toe the party line are the last thing needed.

          They do not represent the voters just the party and themselves.

          • Credible
            Posted December 12, 2013 at 6:12 pm | Permalink

            Better to have just people who are rich running the country then.
            Lets not bother representing most of society.
            Politicians toe the party line for influence not money anyway.

      • lifelogic
        Posted December 12, 2013 at 12:17 pm | Permalink

        Indeed a huge pension, housing and you can do other jobs and act as a “consultant” too. IPSA have compared it with other similar state sector workers but state sector worker are 50% over paid relative to the vast majority who work, usually rather more productively, in the private sector.

        The more they are paid the worse sort of MPs we will get.

        http://parliamentarystandards.org.uk/payandpensions/Documents/IPSA%20final%20report.pdf

        • lifelogic
          Posted December 12, 2013 at 12:23 pm | Permalink

          A report of 45 pages of pointless waffle, five authors and not a singe mention of the fact that the state sector is paid 50% more than the private sector who pay their wages. Or that with pension they already get about 4 times the average wage. Even without the restaurants, housing, travel, jobs for wives, lovers etc……….

        • A different Simon
          Posted December 12, 2013 at 5:22 pm | Permalink

          That increase of 11% should have carried with it an exclusivity clause .

          I don’t think MP’s should be able to do consultancy work or hold directorships .

          (examples removed ed)

          Reply: MPs are not allowed to be paid advocates, or to use their Parliamentary membership to further their commercial interests.

          • lifelogic
            Posted December 12, 2013 at 9:49 pm | Permalink

            “MPs are not allowed to be paid advocates, or to use their Parliamentary membership further their commercial interests.”

            No, but they were not allowed to submit fraudulent expense claims nor claim rent for renting off their partners but it did not seem to deter some nor deter other from employing them in the government.

            Clearly the companies paying them think they are getting something out of it.

        • Bazman
          Posted December 12, 2013 at 5:52 pm | Permalink

          You have yet to tell is which state workers are 50% overpaid in the state sector. Are you saying that nurses cleaners and the like receive 50% more than the state sector, because this is not true. It is true that a large number of jobs in the state sector a part of the middle class social security system ,but putting everyone on zero hours contracts with no sick pay, pensions, and rights is not the answer. The bosses are not on this and never will be despite the need to save and expand to produce more low part time jobs that lead to nowhere. Constantly writing from a view of inherited or married wealth as this is how you live it seems. Whilst telling everyone else they are parasites.

          • Edward2
            Posted December 13, 2013 at 11:45 am | Permalink

            If you buy the Guardian Baz then have a look on the day they have a jobs supplement at some of the pay offered for jobs in quango land, in charities, in local government, NHS management and in the BBC.
            Some of the job titles are a complete mystery to me and the pay is staggering.
            Its not teachers and nurses and cleaners that are 50% overpaid but these non essential people.
            My local council chief executive officer is now on over £300,000.
            Not so long ago he or she would have been called a Town Clerk on a very modest pay rate a pension and a gong from the Queen on retirement.
            The new rich.

          • lifelogic
            Posted December 13, 2013 at 9:57 pm | Permalink

            The figures for average state sector workers say they all are paid 150% of the private sector on average, when pensions are included.

            Do wake up Bazman I keep telling you this and it is very well documented and they have more sick leave, better conditions and retire earlier.

          • Bazman
            Posted December 14, 2013 at 4:25 pm | Permalink

            Now the cleaner is not just 50% better paid but now 150% better paid!? What does this tell you of the state of the private sectors wages and conditions? As I doubt many NHS cleaners if they are not employed already by a private contractor hardly live a life of style and retire at 45. Idiot.

      • livelogic
        Posted December 12, 2013 at 12:36 pm | Permalink

        Perhaps the most nauseous bit of the report is:

        “Review after review has found that MPs’ pay has been kept artificially low for decades and that it should be raised. But, in the past, instead of addressing the core issue, creative solutions were designed and developed to top up MPs’ income. It is this approach which ultimately led to the expenses scandal.”

        In other words if we do not pay them more they will be tempted just to steal from expenses. Oh and they also get one years salary when they resign or are kicked out. So 6 years pay for 5 year work, for many Tories & Libdems very soon.

        The reviewers are usually appointed by governments, so no surprise that they tend to think that 4 times the average wage is too low!

      • zorro
        Posted December 12, 2013 at 6:48 pm | Permalink

        Don’t be mean – Gordon Brown has attended Parliament a couple of times this year…. ;-)

        zorro

        Reply He attends more than that

        • A different Simon
          Posted December 13, 2013 at 12:09 pm | Permalink

          Gordon Brown also gives all of his appearance fees for speaking at events to charity .

          I wasn’t the guys greatest fan but I respect him for putting his money where his mouth is .

    • lifelogic
      Posted December 12, 2013 at 9:18 am | Permalink

      Sorry I forgot Cameron’s quack greenery and expensive energy for reasons of government religion I might have mentioned it before.

      I see that today the “no advertising” BBC is still pushing digital radios. They even found someone who liked them. Who on earth would buy these battery eating & thus not very portable, dreadful reception coverage and now virtually redundant technology radios. In the days of podcasts and 4G it is surely as dead as the eight track and the BSB Squarial. Not very green either will all those batteries used.

      • Vanessa
        Posted December 12, 2013 at 1:00 pm | Permalink

        With cheap energy we pulled ourselves out of poverty and welcomed the industrial revolution !

        With very expensive energy it will destroy our civilised society and push us all back into poverty.

        Well done Cameron !!! Very CONSERVE-ative.

      • stred
        Posted December 12, 2013 at 1:31 pm | Permalink

        Re batteries. BMW have advertised their new i3 plug in electric model as having official fuel economy as 0g/km. a few lines on there is a mention of average consumption of 12.9kWh/100km. The usual g/km is not given. Applying the 580g co2/kWh given in Sustainable Energy via DECC, this gives 74.82g/km, which is better than some other hybrids. The price is£25,625 from a local dealer including a £5k grant paid for by taxpayers. Alternatively less rich Greenies could buy a Kia Rio which emits about 10g/km more but costs around £11k.

        The advertising Standards Authority was keen to stp an insulation manufacturer advertising performance based on their own tests. Perhaps they should stop electric car manufacturers advertising zero emissions. Also, why should wealthy enthusiasts be given £5k paid for by the rest of us?

        • stred
          Posted December 12, 2013 at 1:33 pm | Permalink

          The Rio is petrol engined. The Fiesta petrol also has close fuel economy.

        • Bazman
          Posted December 13, 2013 at 2:27 pm | Permalink

          You have to buy the right engine for the job.
          In January 2014 Emissions law “Euro 6″ comes in to place, this will see the introduction of even tighter emissions and even may see the addition of chemicals called Adblue to be needed in cars not just heavy vehicles. The removal of diesel particulate filters (DPF) will be illegal and an MOT failure, a common solution at the moment. So not a good idea to buy a diesel for short journeys as they clog and are very expensive to repair. Small petrol, but we always knew that. I still bought a 2.3 200PS diesel though with a DPF. D’oh!

      • Bob
        Posted December 12, 2013 at 1:32 pm | Permalink

        Why are the BBC pushing this?
        Aren’t they supposed to be non commercial and impartial?

        If the politicians want it, then let them put it into their election manifestos, and put it to the voters (the way they should have handled the issue of redefining marriage).

        I don’t recall any great appetite to change the definition of marriage, I think it was just driven through due to the large numbers of gay Tories and Lib Dems. supposedly to allow them to avoid IHT.

        • lifelogic
          Posted December 12, 2013 at 4:02 pm | Permalink

          IHT avoidance indeed – but was not Osborne going to give us a £1M threshold each, perhaps he has forgotten his pledge of about four years ago. Or maybe he will promise it again for the next election but now no one will believe a word Gidion or Dave says alas.

          • Bazman
            Posted December 12, 2013 at 5:55 pm | Permalink

            Who cares about a 1 million IHT threshhold. Few have that sort of Money and it is a just tax. Being paid for your parents or grandparents work and nothing else. Parasitical.

          • Edward2
            Posted December 13, 2013 at 11:51 am | Permalink

            I care Baz just because like Lib Dems students loans, it was a manifesto pledge which they have ratted on.
            In a democracy you make up your mind who to vote for largely based on these manifestos, setting out what they will do if elected.
            To drop major pledges like these is unfair on all who vote and is a reason many have no respect or trust in the political classes.

        • stred
          Posted December 12, 2013 at 9:23 pm | Permalink

          They already could avoid IHT under the civil partnership arrangement. The move was initiated by a female MP and backed by the ex public school boarders. As Dave (s?)aid, it will mean that young boys need not worry who they love,( etc ed).

      • forthurst
        Posted December 12, 2013 at 5:29 pm | Permalink

        “I see that today the “no advertising” BBC is still pushing digital radios.”

        This will have nothing to do with a recent Interim Report showing low growth and increasing losses at a production unit for this world beating technology.

    • acorn
      Posted December 12, 2013 at 6:05 pm | Permalink

      Talking about pensions, if you have a look at the WGA accounts (Whole of Government Accounts), you will see that the BoE reckons that the net public sector pension liability is now £1,008 billion. The PAC (Public Accounts Select Committee) Chairman has stated that it is confusing that the ONS accounts say the governments deficit was £90 billion and WGA says it was £185 billion for 11/12.

      The WGA attempts to present the nations accounts, as if it were a Public Limited Corporation (PLC). Just like Tesco or similar. As JR has said before on this site, capitalising future pension liabilities (which is how they get to £1,008 billion) is a bit pointless for UK PLC, that can issue its own currency and can send you to prison if you don’t pay its taxes, no matter how high they are.

      The headline data is at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/226425/WGA_2011-12_key_facts_and_figures_published.pdf

      • acorn
        Posted December 12, 2013 at 6:28 pm | Permalink

        PS. In the above link you will see a statement: “The Government’s revenue comes mostly from taxes and is used to fund expenditure such as social security benefits, staff costs and the delivery of frontline services.”

        This is not actually true, taxes don’t fund anything, but the Treasury and the BoE have to go along with the myth that they do, for the politicians sake. They pretend that the governments accounts are the same as any households’ accounts, they are not. A household USES the Governments currency. The Government, that includes its Central Bank, ISSUE (spend) the currency into existence. An advantage that no household can ever hope to emulate. ;-) .

        Reply tax revenue pays most of the public sector bills. Borrowing is just deferred tax

        • lifelogic
          Posted December 13, 2013 at 10:01 pm | Permalink

          Borrowing is indeed just deferred tax and Cameron is doing lots of it then pissing down the drain.

  7. Bazman
    Posted December 12, 2013 at 9:06 am | Permalink

    Analysis of independent forecasts from Office for Budget Responsibility by the House of Commons Library shows that wages are forecast to be £1520 lower in 2015 than in 2010 and everyone can see price rises in the shops and in their utility bills. Its good that it is going in the right direction, but for who? Many of new jobs that created are low paid and with poor contracts. Low pay and no career prospects may be better than the dole, these kind of jobs will not raise living standards or create a meaningful recovery for most people. This age increase for retirement is meaningless for many in heavy manual jobs and they will instead of getting a pension will receive the money from benefits as the majority will not be fit enough to do the work and no amount harassment by the DWP will change this. Is this country run for the benefit of millionaires and their self employed accountants or for the majority?

    • uanime5
      Posted December 12, 2013 at 8:45 pm | Permalink

      Sad but true. Many of the cuts made by the government to working tax credits and child tax credits have also reduced some of the financial benefits from working, so for some people working doesn’t pay. Until the government accepts that having too many people in low paid jobs is not good for the economy the UK will continue to have problems.

      • Edward2
        Posted December 13, 2013 at 11:57 am | Permalink

        Im surprised you are now arguing in favour of tax credits remaining at their current levels Uni, because I have read many posts from you calling for lower levels of wages to be increased as employers are able to get away with offering low wages because they and their employees calculate that they will get topped up by the State.
        If these tax credits were reduced then employers would have to increase their wage rates to get the recruits they need which I think would be a good thing.

    • A different Simon
      Posted December 13, 2013 at 7:33 am | Permalink

      Agree , raising the retirement age is no solution , it’s ducking the issue .

      Means tested old age benefits are a kludge rather than a solution .

      I reckon sufficient money should be deducted from wages to generate a fund which will pay the lions share of a state pension which makes means tested benefits unnecessary .

      The current state pensions of £7,000 , though an improvement , is not livable .

      • APL
        Posted December 15, 2013 at 7:00 pm | Permalink

        A different Simon: ” raising the retirement age is no solution , it’s ducking the issue .”

        Except they hope that less people will live to draw the pension, therefore it is a solution … of sorts.

    • Lindsay McDougall
      Posted December 14, 2013 at 6:58 pm | Permalink

      When are you going to get it into your head that Labour left such a large fiscal deficit and so much personal debt that a reduction in living standards for the majority was ABSOLUTELY INEVITABLE whoever governed after 2010. You left a poison pill of massive proportions.

      The legitimate criticism of this government is not that they have cut too much but they haven’t cut enough. The path of virtue was abandoned at the time of the 2012 (omni-shambles) budget, when 5 novel taxes proved to be impractical and were abandoned. These taxes were not replaced by, say, a rise in the standard rate of income tax or additional welfare cuts.

      The great schism in the world is not between rich and poor but between savers and spenders, the wise virgins the the foolish virgins. Since HM Government are the most foolish virgins of the lot – by a huge margin – it’s not surprising that they are deliberately running a monetary policy designed to debauch our currency and depreciate their debt.

      This schism is producing some unholy alliances. Liam Halligan (hard Right and our very own prophet of doom) was recently the honoured guest of Max Keiser (hard left) on RT’s Keiser Report. Why? Because they both loathe excessive debt and the destruction it causes. Liam praised the Russian economy because its federal debt is only 10% of GDP. The oil and gas revenue from assets renationalised has been used to pay down debt.

  8. Posted December 12, 2013 at 9:22 am | Permalink

    The economy cannot recover until wages are growing faster than prices so this news is welcome. At the moment we have GDP growth from people running down their savings, which is not long-term sustainable. The growth needs to come from people having surplus cash at the end of each month.

    You mention CPI and RPI. I would remind you that these still do not accurately reflect increases in housing costs. We are in the middle of a government-inspired house price boom, and just this morning a debt charity has warned that increasingly people are behind on their rent.

  9. Brian Tomkinson
    Posted December 12, 2013 at 10:03 am | Permalink

    JR: “They have tended to help the young and hit the old, help the spender and hinder the saver”
    You would never think so if you listen to the broadcast media, most notably, as ever, the BBC.

  10. stred
    Posted December 12, 2013 at 10:22 am | Permalink

    The occupants of Downing Street also saw fit to keep to gold plating of carbon tax. This was supported by the parliamentary committee too, which is not surprising as almost all MPs voted for it. They claim that this only adds a small amount to the bill, int the region of the pay rise. However, they omit the effect of this tax on the ways in which electricity may be generated and this will have a far larger effect.

    The UK is now unable to build the more efficient coal fired generation as in Germany, and has to rely on converting coal stations to burn wood pellets made thousands of miles away at a cost many times that of coal. As coal is our main source of energy, the bills will rise far more than is admitted. And the amount of CO2 saved is also far less than stated, owing to false accounting as set out in the letter from scientists on the EU Energy Committee. It has to be asked whether the Chancellor and his tax extractors understand the efffect of this little grab or whether they are just plain incompetent. No future government will be able to reverse this change, as it is ‘grandfathered’ for 25 years.

    • lifelogic
      Posted December 12, 2013 at 9:55 pm | Permalink

      Burning bio waste is perhaps even more mad than roof pv, wind and HS2. Can no one in government do basic arithmetic? An hour is enough to conclude they are all bonkers.

  11. Neil Craig
    Posted December 12, 2013 at 10:35 am | Permalink

    The current growth is based on house price increases and consumer spending. This is clearly not sustainable beyond the election. Meanwhile the non-EU world is growing at an average of 6% so such growth is clearly possible.

    We could and should have real growth any time our political class would allow it – by allowing a free market in energy production – but all the BBC/civil service approved parties are totally opposed to doing so. UKIP, alone, is actually committed to gtowth. You know all that John.

    • uanime5
      Posted December 12, 2013 at 8:47 pm | Permalink

      Meanwhile the non-EU world is growing at an average of 6% so such growth is clearly possible.

      Care to explain why the US isn’t growing at 6% despite their free market in energy production.

      • Edward2
        Posted December 13, 2013 at 12:00 pm | Permalink

        Because it is an average rate so some will be below and some above.

        At least USA is growing unlike many poor nations stuck in the Eurozone with 12% average unemployment levels and horrendous levels of youth unemployment.

      • libertarian
        Posted December 13, 2013 at 2:00 pm | Permalink

        Uanime5

        Care to explain why the USA is growing at 3.6% and the EU isn’t ?

      • APL
        Posted December 13, 2013 at 8:34 pm | Permalink

        uanime5: “Care to explain why the US isn’t growing at 6% ”

        Because their financial sector is destroying the economy, just like back home in blighty.

  12. ian wragg
    Posted December 12, 2013 at 10:44 am | Permalink

    Off topic but good. I see Cypriot economist is calling for break up of Euro in today’s Mail and Jeremy Warner warns of the demise of the EU in general. Of course our leaders will continue on their “ever closer union” despite proclaiming Eurosceptic tendencies.
    Cameron will be behind the curve as usual and events will overtake him. It will be a dream after 2014 EU elections when a load of anti EU politicians are elected.

    • Denis Cooper
      Posted December 12, 2013 at 1:08 pm | Permalink

      Occasionally somebody will call for the euro to be broken up, perhaps recanting on their earlier views. Even the Dutch Prime Minister called for EU treaty change to allow countries to leave the euro without having to leave the EU altogether, until Merkel persuaded him to pipe down.

      It is not the view of the UK government that the euro should be broken up; on the contrary, the UK government has committed itself to help Save the Euro so that the eurozone is preserved and can continue to expand, as it is legally required to do, until eventually it will engulf the UK as well.

      Next up is Latvia on January 1st, set to become the 18th member state of the EU to adopt its currency; like the Estonians, the Latvians were not allowed a referendum on whether to join the euro because they had a referendum in 2003 on whether to join the EU, and under the treaty of accession to the EU that they approved Latvia is legally obliged to join the euro at the earliest opportunity.

      Every new EU member state has to accept that obligation, and the UK government was perfectly content to see it imposed on Croatia last year; another country put on the conveyor belt into the euro so that eventually it will become a member of the euro bloc lined up against us.

  13. yulwaymartyn
    Posted December 12, 2013 at 11:16 am | Permalink

    These figures are all a bit tedious as we all know that a simple change somewhere else in the system will wipe out any increase in wealth. Other posts have already referred to to this. Why can’t the government make a really real wealth-creating move like the abolition of all business rates? I realise that this would have to be met by cuts somewhere else but I think this would send a message to the entire country that this government is not tinkering around the edges etc etc.

    • A different Simon
      Posted December 13, 2013 at 7:40 am | Permalink

      If business rates are abolished all that will happen is premises leases and rents will go up and companies will be back to square 1 .

      Ricardo’s law of rent in action . And since ownership of property of all sorts was democratised the surplus accrues to mortgage providers rather than the Lord of the Mannor .

      If premises were cheaper there could be a load more small businesses but how to make them cheaper ?

      Maybe shift the burden of taxation from labour and industry onto land with a location value tax as Churchill suggested ?

      • libertarian
        Posted December 13, 2013 at 2:05 pm | Permalink

        ADS

        Not necessarily. My UBR has risen 3 times in last year, My next rent review on my lease is 5 years away so I’d take my chances.

        There are loads and loads and loads of cheap small business premises. I have 4 community work space hubs in the South East of England where the desk rental space is less than a few drinks and one meal out a month. The biggest problem for us is Business rates . We have an average of 30 small businesses in each. So in this instance I totally agree with Yulway Martyn

        • A different Simon
          Posted December 15, 2013 at 5:34 am | Permalink

          Not too much of a problem for an office job but if you are in retail or require proper premises like for instance a car mechanic it’s a problem .

          A car mechanic friend of mine had a workshop costing £500/month a couple of years ago and once motor trade liability insurance was added and power and heating costs the monthly overheads were over £1,000 .

          There was not enough work to employ a second worker .

          Now he has had to move to a derelict building on a farm where he is working 7 days a week and will have to continue to do so until his health gives out which won’t be long .

  14. TIM HUTCH
    Posted December 12, 2013 at 12:38 pm | Permalink

    Good article John. A case can also be made to say that the poorest in society (e.g. those with incomes less than £10k pa and pensioners in this category in particular), have had plenty of help from the coalition towards their living standards. This is due to the great policy of raising the threshold below which you don’t pay any income tax and the triple lock guarantee on state pensions. Not much has been made of this so far, but I have seen figures suggesting 3 million people have been taken out of the income tax net altogether. I cannot recall any time in history when any government (even socialist) has done so much for so many low income individuals.

    • Bob
      Posted December 12, 2013 at 5:02 pm | Permalink

      @TIM HUTCH

      I cannot recall any time in history when any government (even socialist) has done so much for so many low income individuals.

      And next year we’ll have a lot more low income individuals. Yippee!

  15. Iain Moore
    Posted December 12, 2013 at 12:43 pm | Permalink

    Would you be able to fill a bath without putting in the plug?

    There will be no trickle down to the lower reaches of the income scale while we continue to have mass immigration.

  16. David Hope
    Posted December 12, 2013 at 3:35 pm | Permalink

    It strikes me there are all sorts of problems here, many of which originated before the electron

    1. Immigration. Lots of cheap labour has kept down many people’s pay, and did so even during the (artificial) boom years in the 2000s

    2. Lack of home building and cheap credit.. Which is confounded by 1. Particularly in the SE and London but everywhere to an extent the cost of homes and rents has gone up significantly more than wages and so eats into people’s monthly spending power.

    3. Energy – using a few big corporations as conduits of government green policy has pushed up energy bills significantly.

    4. Sterling depreciation – the drop in the pound in an attempt to deal with the recession has of course made many things more expensive.

    5. Damage to saving and pensions. This has hit the income of those who depend on it. But it has also meant that those putting money in have to put more money in for a given return which means there is less to spend now

    6. Ever more regulation – makes everything more expensive, less money for wages (except for legal and accounting departments.)

    7. Loose monetary policy like low rates, QE and all the other one off monetary interventions. They redistribute wealth even if GDP figures may seem stable. Hedge funds and banks do well out of them, everyone else just sees the inflation (or stability where there might have been some minor and welcome deflation) they eventually cause.

    8. Tax. VAT is high, anyone who smokes or drinks is hit even worse. The 40% rate picks up ever more people.

    9. Cheap labour in china maybe…but it strikes me this also makes a lot of goods we enjoy a lot cheaper so I am unsure of the net effect

    The causes are pretty clear to see, but a lot of things need to change to fix it. What is clear I think is that pure GDP growth is not enough, as we aren’t in a pure market environment right now and government policy is causing redistribution

  17. Dennis
    Posted December 12, 2013 at 3:45 pm | Permalink

    “Let’s have rising living standards”

    What absurdity, if you care about the future. The rich nations now and the becoming rich nations are already depleting non renewable resources and destroying, polluting and wasting the biosphere and Redwood wants us to become even richer to do more of it!!

    Obviously he has no desire for us to become a fair society – he doesn’t realise his proposals are greedy.

    • M.A.N.
      Posted December 12, 2013 at 7:21 pm | Permalink

      Too late now. You cannot un- invent the Industrial revolution. Having travelled widely I do not want the same standard of living as someone in Syria, Egypt, or Somalia, and I bet you don’t either.

    • Edward2
      Posted December 12, 2013 at 7:44 pm | Permalink

      Well Dennis first you need to get Brazil India Russia and China to agree with you.

  18. A different Simon
    Posted December 12, 2013 at 5:26 pm | Permalink

    I’m earning less than six and a half years ago and there is no possibility of a pay rise .

    If it wasn’t for the pound being debauched I’d have had to reduce my prices still further .

    Who are these people who are getting pay rises ? Do they really exist ?

  19. lojolondon
    Posted December 12, 2013 at 5:35 pm | Permalink

    John, this is about the Biased BBC’s fake investigation into their own crimes.

    We always knew this would be a cover-up – to recap, in a massive media conglomerate, someone hacks mobile phones and it takes a Parlimentary enquiry to get to the bottom of it, including dragging Rupert Murdoch to the UK to demand answers.

    In another massive media conglomerate, someone rapes and sexually abuses dozens of children over decades with full collusion of the entire organisation up to the very highest levels of management, and they get to run their own enquiry.

    Which just turns out to be total garbage.

    I think this should go further than Pattern walking away, I think he should (be disciplined ed), and the BBC should have their TV Tax cancelled and go commercial.

    • Bob
      Posted December 12, 2013 at 8:21 pm | Permalink

      @lojolondon

      In another massive media conglomerate, someone rapes and sexually abuses dozens of children over decades with full collusion of the entire organisation up to the very highest levels of management, and they get to run their own inquiry.

      The phone hacking scandal was pushed by the BBC/Guardian axis despite little interest from the public, who mostly had no sympathy with Hugh Grant and others who had neglected to secure their voice mail accounts with a password until the Guardian alleged that a murder victim’s messages had been deleted by hackers, which caught the public’s attention and resulted in the closure of the News of the World with the loss of hundreds of jobs, followed by the squandering of millions of pounds worth of taxpayers money on the Leveson Inquiry.

      It turned out to be a politically motivated vendetta against Murdoch.

      The Guardian’s allegation turned out to be false because the messages had been deleted by the voicemail system itself.

      Now let’s see how hard the Guardian go after Chris Patten and the BBC (top tip – don’t hold your breath).

      • uanime5
        Posted December 14, 2013 at 1:24 am | Permalink

        There was some interested in phone hacking when Prince Charles’ phone was hacked and one of the News of the World’s reporters was imprisoned for phone hacking. There was a renewed interest when it was revealed that this hadn’t been an isolated incident.

        According to the Leveson Inquiry it wasn’t possible to determine who had deleted the messages on Millie Dowler’s phone as this information no longer existed.

  20. uanime5
    Posted December 12, 2013 at 8:50 pm | Permalink

    Maybe the Labour party does not believe these forecasts. Or maybe they just needed to say something different when the economy started to grow, disproving their pessimistic past forecasts about the impossibility of recovery.

    Well Labour has been right for 3 years about low growth and even the OBR didn’t predict the amount of growth we’d get this year. As there’s also some evidence that this recovery is due to savers spending their savings because of the low rates of interest they’re getting from banks it’s possible that this recover will not be sustainable.

    It may just be a short term campaign, which they will end as wages rise and real incomes go up.

    Unless the number of people who are unemployed goes down there’s no prospect of wage rises. The more desperate the government makes people for work the less incentive employers have to raise wages.

    They are more inclined to trust the government than the opposition on the big arguments about debt and deficits.

    Which is odd as both have increased under the current coalition.

    Reply Labour talked about a double dip and treble dip which never happened, and forecast no recovery on current policies, only to see a sharp recovery now underway.

  21. Bazman
    Posted December 12, 2013 at 9:00 pm | Permalink

    The end of an era as Blockbuster gets wound up.
    http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10513309/Administrators-wind-up-Blockbuster-video-with-loss-of-800-jobs.html
    Job losses due to new technology such as film streaming and on demand services by cable and satellite services. They are in turn being hit by the internet. They are frantically trying to block access to many sites offering their wares for free. Futile as every teenager can verify on facebook singing their praises and giving advice of how to avoid the block. Get prosecuted? Get real? Internet savy teenagers will, but not you will and be made an example of. DVD rental finished in my town years ago, but a brand new cinema being built though at long last if you have not already seen it on the net and like expensive popcorn. How soon before we have to deal with such things as driverless cars and trucks, automatic warehouses, shops and the like. Drones delivering small things such as pizza and jewellery is next and not far off. What will the lads do on Monday to quote Cecil Franks MP. Sell Blackpool rock as he once suggested? Sank without trace soon after.

    • Edward2
      Posted December 13, 2013 at 12:09 pm | Permalink

      People who made wagon wheels and horseshoes also lost their jobs once Baz, but life goes on and new opportunities do open up.
      The idea of a job for life is very rare now with many needing to retrain more than once in their lifetime.
      More skills and a high level of education is needed to succeed.
      The pace of change is speeding up with technology advances and world competition hitting the UK more and more.
      The standard of living in USA and the West is under threat from new strongly emerging nations like Brazil India China and Russia.

      • Bazman
        Posted December 14, 2013 at 4:37 pm | Permalink

        I don’t disagree with this, but for many there will less opportunities as technology advances, as you say due to the rise in cheap labour in developing countries, which is in turn being hit by automation, not everyone can be a rocket scientist. So what to do and how to spread the wealth was my point. It can’t trickle down by jobs it seems as there will not be enough, except in areas where automation is not possible.

  22. Rob
    Posted December 13, 2013 at 12:09 am | Permalink

    Regarding how good things are now for borrowers (including BTL landlords) at the expense of savers, when a central planner picks the winners and losers you know you’re living under communism.

    There’s no capitalism, without capital. The Bank of England printing press has replaced the saver under a communist tory government.

    I can’t wait to *not* vote tory come the next election.

    Reply If you want a Labour government then vote for it, because that’s what we will get if too few people vote Conservative

    • Rob
      Posted December 13, 2013 at 2:23 pm | Permalink

      I really don’t care anymore if Labour get in. I honestly never thought I’d say that, especially with the likes of the useless (etc ed) harman still around, but I’m sick to the back teeth of the help given by this government to the borrowers, the BTL brigade, and the Liar Loans fraudsters at my expense via QE, ZIRP, Funding for Lending, and Help-to-Bubble.

      At least with Labour the theft of my hard work will go towards people who now need it – for example the unemployed, the disabled, and the poor and needy. I can accept that. What I cannot accept is the theft of my hard work being given to the already well off, including of course the BTL landlords and bankers, and to bail out those who have spent well beyond their means. It’s gone on far too long John.

      I’ll vote UKIP, and if Labour do get in then in my view it’s the next best thing. Your party has been an unbelievable dissappointment. So many broken promises and more lies than even Blair.

      p.s. my anger is aimed at tory HQ, not you.

  23. petermartin2001
    Posted December 13, 2013 at 1:04 am | Permalink

    The savers deserve some reward as prudence should not be a crime.

    That’s true. But the accountancy principle of saving to have to be understood as well. ie for every asset there is an equal liability which has to be borne by someone else.

    If the private sector generally build up their surpluses, or assets, it must follow that the public sector have to fall into fall into deficit and accept the liabilities.

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  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
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