UK income falls more fairly than France

Hamish McRae wrote an interesting article on income inequality and  the recession in Monday's Evening Standard quoting a report from researchers at UBS.  In it they stated that the loss of personal income due to the recession in the UK has affected all income groups pretty evenly - which contrasts with most of mainland Europe and the US where the fall in income for the richest 10% has been much less than for the poorest.

I've finally tracked down the report on the web here and I've reproduced the table that compares income falls over the last five years by decile:

Those progressive paragons of France and Scandanavia - who the left are telling us to be more like - saw the poorest 10% lose far more than the richest.  In France the poor's income dropped nearly 10% whereas the richest dropped by less than 5%.  In Finland the richest 10% actually saw incomes rise over the last five year.  In contrast in the UK, the poorest decile's income fell by about 7% over the last five years - slightly less than the richest 10%.

One can't help wondering that the UK would look much more like the US and most of Europe if the Tories (or even New Labour) were governing on their own. 

Pay fall figures show Labour's economic stupidity

Labour have been bragging about how UK pay has fallen over recent years compared to our European neighbours.

But unsurprisingly they fail to make any reference to the numbers of people out of work all together.  But the following chart from Reuters might help them to understand the bigger picture.

Nearly all the major economies in Europe have higher unemployment than the UK and nearly all of them - despite recession have seen wages fall less than the UK (or even rise).  The exceptions are Germany (which hasn't been in recession and seen a very small rise in pay levels) and the Netherlands (which has seen pay fall by further than the UK, but has lower unemployment).

So even though most UK employees have seen their pay squeezed, they have generally kept their jobs.  But for Labour that isn't the right policy - they would rather another 750,000 workers sit on the dole so the UK could enjoy French levels of unemployment so that those still in work could enjoy an 0.7% pay rise.

And there's one other fact that Labour might not want to publicise from their own research - those people in the public sector enjoy substantially higher pay than those in the private sector and have seen their pay drop by half the rate of those in the private sector.  So it will be interesting to hear their justification for the substantially better terms, conditions and (particularly) pension rights public sector employees continue to enjoy, when the IFS say, "In 2009, the average public-sector worker earned about £16.60 per hour, which dropped to about £15.80 in 2011, while, hourly pay for private-sector workers in 2009 was just over £15.10 and dropped to about £13.60 in 2011."

Waverley route reopening boosts property market

The Edinburgh Evening News reports a doubling of the number of new homes built along the soon to be reopened Waverley Line. 

This is a not unexpected consequence of the reopening - and one that I suspect may not have fully been costed in its cost benefit analysis - given we are still two years away from the first train service. If so it should make the economic case for more rail reopenings that bit more positive.

French double dip recession challenges social liberals

News that France has returned recession poses problems for those - like the Social Liberal Forum (SLF) and indeed Ed Balls - who believe that government action can create economic demand (and jobs).

That such an explicity interventionist government as that of Francois Hollande is unable to stem the tide of Eurozone recession is surely evidence that in such a globalised world - where multinational corporations are bigger than many economies - the power of governments to change much (at least in the short term) seems pretty limited.

And that is also the failure of the SLF and others who call for plan Bs (or Cs or whatevers).  By failing to recognise the limits of government and putting too much trust into a 'benign' state they perpetuate remote  bureaucracies, overweening and overeaching politicians and allow the state to centralise economic and other power in too few hands.

In the end economics - like politics - is about people and how they interact with others.  And so Liberals should look for a new economic strategy - one that truly understands the limits of state action and the importance of people. 

A good place to start might be David Boyle who seems to be streets ahead of the SLF in defining a new liberal ecomomics - fit for the reality of the 21st century - and not simply a rehash of the failed post war certainties of the SLF and Ed Balls.

IFS report shows income inequality falling

The ever excellent Richard Kemp highlights a new report from the Institute of Fiscal Studies - Living standards, poverty and inequality in the UK: 2012 - which shows that income inequality is falling under the coalition.

The salient passage is:

Income inequality in the UK fell sharply in 2010–11. The widely-used Gini coefficient fell from 0.36 to 0.34. This is the largest one-year fall since at least 1962, returning the Gini coefficient to below its level in 1997–98. Although this reverses the increase in this measure of income inequality that occurred under the previous Labour government, it still leaves it much higher than before the substantial increases that occurred during the 1980s.

Driving this drop in income inequality, the falls in real incomes in 2010–11 were smallest towards the bottom of the income distribution and largest towards the top. In the UK, real incomes fell by 1.1% at the 10th percentile, 3.1% at the median and 5.1% at the 90th percentile.

So there you have it - income inequality rose under Labour - and is falling under a Liberal Democrat influenced government.

Given the lack of any government minister publicising the fact one can only assume this is a source of embarrassment for the more strident Conservatives in the coalition.  But you would have thought that Lib Dem ministers might wish to highlight the fact.  But perhaps reducing inequality is just too left wing for a party committed to 'governing from the centre' (whatever that is)...

Coalition should call Balls's bluff over economy

On C4 news tonight Shadow Chancellor, Ed Balls, called for a grand coalition to deal with the economic crisis.  You can watch it here.


Obviously, given it's Balls he is unlikely to be serious about the offer - he's only interested in the short term tactical embarrassment ot the government.  But it carries risks for Labour - if they were brought into the key economic decisions, then they become just as culpable for this stage of the recession as the Lib Dems and Tories.  And that can only be a benefit to the coalition parties.

Which is why they should take him up on his offer.  But given the personal animosity between Balls and Osborne, the offer will be rejected and Balls's tactics will have (again) won the day over the supposedly superior strategist, Osborne.  But that shouldn't stop Vince Cable entering the fray.

The one budget U-turn we won't see...

'... today George Osbourne admitted cutting the 50p top rate of tax was a mistake and agreed to continue with it until economic conditions were suitable for tax cuts.'

If he did however, he might start to restore some of his recently (deservedly) shredded reputation for economic competence.  It might also help the Conservatives deal with the issue that they are perceived as a bunch of out of touch rich boys.

Staggers gets it wrong on 'moral capitalism'

The New Statesman has set two tests to see if David Cameron is serious about so called 'moral capitalism'. One is to withdraw the knighthood from Fred 'the Shred' Goodwin - the bank's former CEO. The other is to prevent the bank paying the current CEO, Stephen Hester, his million plus bonus.

Sadly these tests say more about the paucity of thinking on the Labour left than the glib Cameronian soundbite of 'moral capitalism'.

What RBS and the other banks need is a dose of hard anti-trust legislation. All of the banks - regardless of who owns them - need to be cut down in size and split up so the they can't use retail deposits to subsidise their casino operations. In addition they need to divest themselves of sufficient retail operations so they cease to act as a cartel and make space for true competition in the high street for deposits and loans.

By missing the essential big picture to concentrate on irrelevant ad hominem attacks, the Staggers is echoing its Labour masters. And if all Labour have to say on banking and the economy is to interfere with a bonus or two and withdraw a knighthood (that they granted) then they truly have lost the debate on the economic crisis.

Conservative eurosceptics should be careful what they wish for

Conservative eurosceptics are arguing that any new Euro treaty that leads to a closer economic union for the Eurozone should be vetoed by the British PM if it doesn't include unspecified protection for the City of London. Or if there is no veto it should be subject to a referendum - with the clear assumption that the UK electorate would reject any treaty.

Boris Johnson, who should know better, told the Beeb, the UK should oppose any change which created a "very dominant economic government" across Europe.

"If Britain was asked to sign up to such a thing within the 27 (all the members of the EU), it would be right to veto it and if we felt unable to veto it, I certainly think that it should be put to a referendum,"

In common parlance this is called cutting off your nose to spite your face. Vetoing a Eurozone bailout would be an act of extreme foolishness. The economic consequences for the UK and, yes, the City of London of a Eurozone collapse would be devastating.

With the European economies - whether they use the Euro or not - tetering on the brink those that are opposed to all things European would appear to prefer economic meltdown than to agree a sensible package of emergency measures which may help to alleviate the current crisis. Failure to agree a deal not only brings down the Eurozone it also destroys the large chunk of the UK economy that does its business with the zone.

Balls in fantasy land

Shadow Chancellor, Ed Balls, is doing the rounds of Labour conference apologising for getting some things wrong on the economy while they were in power. He has also launched a vacuous and wrong slogan 'Building schools and hospitals did not create the deficit', by way of non-apology over the government's structural deficit.

Except that it did - and saddled the UK tax payer with expensive 'off book' PFI deals that transfer money out of public services and into the bottom lines of private construction companies for years to come. Estimates suggest that the tax payer will end up paying 10 times the value of the capital assets involved.

So when Balls asks people to take him and his party seriously on the economy I hope people remeber just how much of their money he wasted needlessly on PFI - among other failures such as IT.

And thanks to the BBC Politics Show archive you can still view the wonderful attack on Balls as 'a 27 year old researcher' by Michael Heseltine at the Tory conference in 1994.

Danny Alexander take note...