Money

Britain’s other crisis


While Britain’s parliamentarians spent last week engaging in the latest round of debate on how to leave the EU, economists were treated to a swath of new data on living standards.

The figures did not make for comfortable reading: UK households saw no growth whatsoever in real incomes last year, according to Department for Work and Pensions statistics. 

Austerity and inflation entirely offset the effects of higher employment and increases in the minimum wage. This meant the number of people living in both relative and absolute poverty increased, and child poverty is on the rise again.

Meanwhile figures from the Office for National Statistics showed the gap in life expectancy between the richest and poorest areas in England and Wales has widened because women living in the poorest 10 per cent of local authorities are dying earlier. 

And, finally, difficulties in funding social care provision will lead local governments to raise council tax by an inflation-busting average of 4.7 per cent this tax year.

Councils have borne much of the brunt of austerity through cuts to their funding from central government at the same time as an ageing society and an increase in the number of adults with mental health problems has raised the cost of providing social care.

This all means that whatever the outcome of next week’s debates over how to leave the EU, politicians will soon be dragged into another divisive political debate when the Treasury completes its comprehensive spending review later this year and Britain must decide what balance it wants to strike between taxation and spending on public services.

This week’s calendar

Monday

9.30: Manufacturing purchasing managers’ index (March)

Recent manufacturing PMIs have pointed to an increase in stockpiling amid a generally downbeat outlook for Britain’s manufacturing companies. Last months also pointed to cutbacks in employment. However survey data has not been reflect in the official figures recently and may be less of a guide to the UK outlook than usual.

Tuesday

9.30: Construction PMI (March)

The UK construction industry contracted in February, according to a PMI that registered the worst reading since the Beast from the East snowstorm. Analysts expect the survey remained below the psychologically important 50 level in March that IHS Markit says indicates contraction.

Wednesday

9.30: Services PMI (March)

The most important of the three PMI surveys will give us our best indication yet of the UK’s performance during the first quarter of the year. It may be best to take it with a pinch of salt this time, just as in the immediate aftermath of the referendum the surveys and the official data are diverging.

9.30: Independent economists at the Treasury select committee

Economists from the Institute for Government, the Resolution Foundation and the Institute for Fiscal Studies will be all giving evidence to the TSC on the government’s Spring Statement and the forthcoming Spending Review.

Last week’s highlights

So much for rebalancing

Consumers powered Britain’s economy last year, as they spent more than they earned for a record ninth consecutive quarter at the end of last year. Net trade has proved a drag on growth since the referendum while non-business investment and government consumption have provided a modest boost.

Everyone’s taking about: productivity

Data published by the Office for National Statistics last week showed that the number of people working in easy-to-automate jobs has fallen over the past decade. Partly because we have already automated them and partly because of growth in jobs like care work which are far harder for robots to do.

As FT economics editor Chris Giles wrote last week, the data adds to the evidence that when it comes to productivity we should be thinking about finance, pharmaceuticals and telecommunications; not low-skilled work that can be replaced by capital.

Quote of the week

“The political conversation around austerity may have shifted but the lived experience of it hasn’t for millions of families” — Adam Corlett, senior economic analyst at the Resolution Foundation on last week’s DWP data.



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