Posted by Jake on Saturday, April 19, 2014 with No comments | Labels: Article, Austerity, Big Society, credit crunch, Graphs, inequality, Inflation, pay, taxation
In April 2014, just before Easter, newspapers including the Express and the Telegraph reported:
“March’s UK inflation figures suggest that the six-year squeeze on real earnings is finally over”
For the first time in 4 years prices were not rising faster than wages. Were they right about the squeeze being over?
Actually, in the 5 years upto March 2014 price rises have outstripped wages in 57 months out of 60.
This has left us on average 8% worse off than 5 years ago.
ONS figures show the effect this has had on spending. In real terms (at 2012 prices) average household spending fell between 2001 and 2012, while average houshold income was actually higher in 2012 than 2001.
Incomes up but spending down? What happened? Two limits had been hit:
- The spending of the wealthiest is limited by running out of things they want to buy.
- The spending of the poorest is limited by the money they have to spend.
Giving the wealthy more doesn't result in more spending. However taking away from the poor does result in less spending. Result: higher average income, lower average spending.
At the Downing Street Easter Reception in April 2014 David Cameron said
"Jesus invented the Big Society 2,000 years ago...I just want to see more of it."
Cameron is perhaps thinking of Matthew 13:12 quoting Jesus:
"For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, from him shall be taken away even that he hath."
Perhaps Cameron thinks Jesus was talking about wealth. The Tories have given the wealthy more with cuts to direct taxes (income tax) and corporation tax, and taken from the poor by increasing indirect tax (VAT) and cutting welfare.
Perhaps Cameron doesn't understand that Jesus was actually talking not about wealth but about understanding.Thereby uncomprehendingly proving Jesus' point.
Taking a longer view on the cost of living, the data shows that we are now back in the same position we were in 2004. For some there never was a cost of living crisis. For others the crisis still has a few years to go.