Author Topic: It is grim up North (In the UK)  (Read 441 times)

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Online Taman Tun

It is grim up North (In the UK)
« on: February 14, 2013, 08:33:27 PM »
This article is taken from today's Daily Telegraph:-

In the last three years inflation has eroded a decade of economic growth, and worse is to come
By Thomas Pascoe 

It's rough out there. Three years of inflation outstripping wage growth has seen real wages fall back to 2003 levels, the ONS announced this morning. Over the long term, we are back to square one with men earning slightly less in real terms than in 2002, and women slightly more.The Bank of England increased its inflation forecasts for the year ahead this morning, predicting that CPI will rise to 3pc and not fall back to 2pc until 2016. The market is pricing in inflation of about 2.8pc per year over the next five years (crude measure in RPI based on gap between nominal and index linked gilts). Wages, as you probably know, aren't going anywhere fast, despite bullish predictions of a 4pc annual rise by 2015 in the OBR. The decline in living standards will last for years.
The problem the Coalition face is that, as Benedict Brogan pointed out earlier this week, voters don't think over a ten year period. They think over the life of this parliament and weigh the prospects for the next. So far the last three years have seen a sharp contraction in real wages and, as a result, living standards. While Labour's record of state expansion and debt accumulation was reckless and wicked, there comes a time when the Chancellor's record must stand on its own.
This record consists of the largest debt in this nation's history which – contrary to promises at the outset of this parliament – will not be falling by 2015, a failure to hit debt targets by a margin of £75bn next year on the CBI's projections, and a record of trashing confidence in the economy through gloomy talk of austerity without actually delivering cuts. We have, to an extent, the worst of all worlds, and there comes a point where the man who fails to act becomes as guilty as the instigator.
Given that they depend on relatively fixed incomes without the bonus culture and income control of the top decile, and without the recent inflationary benefits rises of the bottom decile, the working and middle classes will bear the brunt, as the Resolution Foundation argued yesterday. Annual spending power across the country is declining by £280 a year, 55pc of the "squeezed middle" have no savings, 69pc have no pension, a low to middle income household could have saved a deposit in three years in 1983, it would take 22 today thanks to our determination to prop up asset prices, despite 83pc of men and 75pc of women in that group working. There is a large and growing class of person in this country for whom this crisis is not a parlour game jumble of bond yields and pointless railways, but a one-way ticket to an economic life as indentured, miserable and joyless as any generation's since the Great War.
The kicker is that this has been an object of monetary policy since the crisis started. Sir Mervyn King's determination to lower the pound, ignoring the fact that Sterling movements cannot prompt an export boom because so much of our energy and raw materials is sourced abroad. All we do is inflate domestically. Money printing (and it is money printing, it's impossible to withdraw the stimulus which is the technical difference) through QE has again provided for domestic inflation. The plan has been to devalue the nation's debts through loose monetary policy, a soft default, but as tax revenues have fallen with domestic confidence, even this has not worked.
Britain and the British face some very hard times, and try as I might, I see on neither front bench any inkling of how bad things are, or will continue to be if we keep on down this road.
We are masters of the unsaid words, but slaves of those we let slip out. Churchill

Offline Roger

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Re: It is grim up North (In the UK)
« Reply #1 on: February 15, 2013, 06:09:27 AM »
It is grim in the UK - all over.
I've thought many times over the last 5 years at least, that what we are seeing in the UK is the readjustment of our standard of living to reflect the reality of what we actually earn. From a 'borrowed' to an 'earned' standard of living.
The economic tricks to defer this reality are all but exhausted and it's hard to see how we can hope for manufacturing industry to be the saviour, needing to import raw materials and then having to compete with China, India et al.
So this readjustment is likely to be an permanent one.
In the longer term, given the general state of UK education, I don't see floods of new inventions and intellectual property on the horizon.
The Government continues blithely fiddling around with an ungovernable Britain that heads in one direction at the moment.
Heaven knows what my happen if the 'Markets' give up on us !

I generally think of myself as fairly far 'left' in thinking, but the only plausible plan to ameliorate or improve the situation, I read in the Daily Telegraph a few weeks ago - a package of measures including reducing Corporation Tax to 12% as an attempt to kick start the economy.

Next time you see statistics about the deficit, divide the figure by 60 million population and then increase the figure by say 4 times, (1 in 4 are wage earners), to see how much we are STILL living above our means.

Thanks TT

Online Taman Tun

Re: It is grim up North (In the UK)
« Reply #2 on: February 15, 2013, 05:25:55 PM »
Hi Roger,  Yes I fear the readjustment has a long way to run yet and it will be irreversible.  It is just not possible for a country to keep  paying itself high wages in the face of competition from low wage Far Eastern countries.  The UK welfare and benefit entitlements are just not sustainable.  Also the UK still needs to come to terms with the fact that it is no longer a global power and can no longer afford (and has no use for) an expensive nuclear submarine fleet or two expensive aircraft carriers which will not enter service until 2022.   
We are masters of the unsaid words, but slaves of those we let slip out. Churchill