The media and politicians concentrate on the coming squeeze on the public sector. It is struggling to live within an extra £485 billion overdraft to tide it over the next five years, and to live with an increase of just £93 billion a year by Year 5 for current spending.
Meanwhile, the squeeze which everyone else feels is the squeeze on incomes from inflation, low wage increases, and higher taxes. According to the Office of Budget Responsibility, earnings will go up by 2.9% less than prices in 2010-11, 3.4% less than prices in 2011-12, and by 0.1% less than prices in 2012-13. In other words, the OBR forecasts a 7% reduction in average living standards as prices rise faster than incomes.
Increasing tax takes do not help either.
There needs to a balance between the squeeze on the public and the squeeze on the private sectors. The current strategy of large increases in tax revenue and continuing increases in public spending and borrowing are squeezing the private sector considerably.