“It’s about living standards, stupid!”

Summary

Why it’s not just about the economy – some thoughts on the Resolution Foundation’s Commission on Living Standards report

The Resolution Foundation’s report has got the bubbles of Whitehall and Westminster incredibly excited. It was embargoed until stupid-o’clock last night so that Newsnight could have a highbrow conversation on what was in it before we could get our pesky little eyes on it – which I thought was unfair. Far better to let us all see a copy and then do the Newsnight feature so that we can make informed judgements on what the panel – in particular the Universities’ Minister David Willets, were saying. But hey, that’s a presentational issue.

“So Pooffles, what did it say?”

The first thing to note is this isn’t your typical under-resourced-but-politically-connected think-force/focus-team report that decides the conclusion or political line it wants to follow before looking for evidence to back up said claims. This was one that had some Establishment big cheeses that are seen (by senior party political types) to be reasonably moderate but independent from both centre-left and centre-right of politics. This means that politicians can turn around and say stuff that sounds like:

“I know the general public think I’m a two-faced lying toe-rag and wouldn’t trust me me for their lives, so don’t take my word for it, take the word of the highly-regarded independent commission on [insert name] who have reported [selected quotation] that clearly backs up why we’re right and that ‘orrible lot over there are wrong – vote for us!”

I’ve heard it said in some quarters that independent reports and reviews further undermine the trust in politicians as a cohort because it automatically implies that politicians cannot be trusted.

Actually, there are a number of very highly regarded people on that panel who walk that tightrope of having to remain credible to all political parties in the work that they do. Ben Page of Ipsos Mori is one of them. It’s not easy trying to maintain a distance from party politics when party politics is trying to drag you into them to give them that extra ounce of credibility.

Length, volume and bibliography – Beecroft vs The Commission on Living Standards

Just so as to illustrate the point, let’s compare the Beecroft report (16 pages, no bibliography and hardly any references) sitting on the Department for Business’ website versus the Commission on Living Standards report (139 pages cover-to-cover, a page (p3) full of preceding publications, footnotes and references aplenty and seven pages of bibliographical references. In my book, if you are going to be making significant policy recommendations, the latter is the sort of thing I’d expect to see, not the former. If only the Labour-commissioned Browne Review into the funding of Higher Education was done with the level of resources, engagement and quality of write-up and referencing as the Commission on Living Standards – especially given the amounts of money at stake and the generations of young people that will be affected. Remember that the Browne Review only spent £68,000 on research on what was a seismic change of government policy, and was deliberately scheduled to report just after a general election (in which the two main parties had no policy other than to study the review’s recommendations carefully – which is not a policy) so that whoever was elected could implement the publicly unpopular but political-establishment-desirable objectives early on in the new Parliament.

OK, so the Resolution Foundation did good, but what did they say?

It makes uncomfortable reading for all political parties – both in terms of Labour’s record from 2003 and the Coalition’s current policies. It’s much harder to get away from a detailed analysis of comprehensive data sets as far as politicians are concerned. What it also means is that debates that follow need to be of a different format to man-bags across the chambers of Parliament.

“[F]rom 2003 to 2008 disposable incomes fell in every English region outside of London”

Now if the above quotation from the start of the executive summary doesn’t raise concerns within political – and Labour ranks in particular…exactly. This was despite strong economic growth and rising employment during those times. Why were we all blind to what was going on outside of London? This raises all sorts of issues for all sorts of institutions. Did and does all things London drown out news of what’s going on elsewhere? Were there limitations and shortcomings on the indicators being measured by statisticians?

“The changing nature of inflation accentuated the problem for lower income households as prices for staple foods and fuel soared, meaning that official measures of inflation understated the pressures they experienced.”

What they mean here is that the basket of goods used to measure inflation changed – for example as reported here. Yet in a society where in 2012  just over 15% of the population had never used the internet, how can a ‘basket of goods’ that contains things like online dating website fees or smartphone apps (I appreciate it’s all averaged out statistically) be of any relevance to people who are otherwise struggling to heat their poorly insulated rented accommodation or who are struggling to put decent food on the table?

“By the time the crisis struck, these shifts in the nature of inflation meant that low to middle income households were typically paying a £400 premium on their annual shopping bills compared with those on higher incomes.”

That premium works out at just under £40 per month, which for a family on a low income is enough to provide basic foodstuffs for a week. That is a significant amount of money for someone on a low income or on benefits.

The drawbacks of public sector outsourcing

This was touched on in the executive summary and on p54 of the main report, but is worth exploring further. Prior to the outsourcing boom of recent decades, staff responsible for front-of-house services in public sector buildings – reception, security, catering and cleaning – would be ‘in house.’ In Whitehall this meant that they were permanent civil servants – or so the old hands I used to work with told me. Then came the rise of the outsourcing firm and pressure to transfer out such functions to the private sector on grounds of cost saving.

But while this might save spending on an organisational budget, as the report states it enables outsourcing firms to squeeze the wages of low-paid workers with the predictable consequences of low pay & poor conditions of jobs (often taken on by migrant workers with little protection) and rising salaries of the executives of such firms that ‘provide the services’. Hence you end up in a situation where the state has to subsidise the low-paid through tax credits, as well as having to deal with the symptoms of people working long hours on low pay, such as poor health to having no one to look after family (whether children or the elderly) – having an impact on them too.

At the other end of the scale, you end up with executive directors on telephone number salaries – let’s look at Olympics’ shambles Buckles of G4S – along with nice cushy non-executive directorships for former MPs and former ministers – such as former Home Secretary John Reid who works for the same company responsible for the Olympics’ security debacle. It’s a false economy that screws the front-line employees, screws the tax payer in general but benefits excessively paid executives and politicians looking for a nice earner once their career is over.

Interestingly, Will Hutton’s interim review for the Government on fair pay in the public sector in 2010 hinted in favour of a 20:1 ratio of salaries between the lowest paid and highest paid employees in any public sector organisation. I’d go further and impose that as a condition of tender for any organisation looking to secure a public contract. I’d also be tempted to compel PLCs to put to shareholders’ votes the setting of a ratio of executive pay to the lowest earner, but initially leave it up to shareholders to decide what that level should be. That at least would force boards automatically to consider how much they are paying their lowest paid staff. Boards would have to consider what they could afford to pay executives within the context of their low paid, knowing that a ridiculous ratio would, in this social media age, lead to lots of negative publicity.

Enforcement of minimum wages

I remember on some regional visits outside of London during my civil service days talking to some people who were saying how badly paid some of their relatives were being paid. When I enquired as to how much, it was abundantly clear that the employers were breaking the law. I gave them details of who to contact regarding the alleged breaches. If you or someone you know might be being paid less than the minimum wage, contact this lot for advice. It’s not easy to push for your rights when someone else has all of the power over you & when there’s no one to fight for you. In these tough economic times, people will genuinely fear for their jobs.

Women’s rights (p61 ono)

One of the things that struck me during my Fast Stream days was the number of women who spoke in open forums that their decision to apply for the civil service was a positive choice – i.e. they chose the civil service ahead of the private sector that could pay significantly more. Now that some of those are at risk, this could have a knock on impact on women’s ability to work for the civil service. Flexitime can be invaluable for people with young families – but it’s a benefit that’s difficult to quantify. Being able to arrange to come in late/go home early and make up hours later on can take a lot of worry off of people, whether it’s emergencies to things like taking children to the dentist.

There is then the cost of childcare – a huge barrier – and not just to women. One of the things I feel we don’t have is a comprehensive picture of how people deal with the issue of childcare. How many children are being looked after in paid care? How many in workplace schemes? How many are being looked after by grandparents/relatives/friends? How many women are willing but unable to access the workplace due to lack of childcare availability? What is distribution of childcare facilities like locally, regionally and nationally? How should childcare be funded – by the state? By employers? By the parents? What should the split be? I’d like to think that as more women stand for and enter Parliament, the further up the political agenda this will rise.

Income v expenditure

There’s a very interesting pie chart on page 68 comparing sources of household income in low to middle income families between 1968 to 2008. Tax credits and benefits made up 9% of household incomes for those income brackets in 1968. That figure was 18% for 2008. What the actual inflation-weighted figures & differences are I don’t know.

It’d be interesting to see what the expenditure breakdowns were in comparison, both absolute and percentages. Are people spending more in essentials – housing, food, fuel as a percentage today compared to 1968? If so, why?

A pessimistic future ahead?

The summary on page 76 is jaw-dropping. Even assuming an economic recovery, by 2020 low income families will see their income levels similar to those they had at 1993, and for middle income families, levels similar to 2001. The summary on page 92 – including the recommendation on tackling low pay is one that will be too politically unpalatable to New Labour types, Orange Book Lib Dems & Conservatives in general because it implies direct intervention in labour markets.

Forward to the 2015 General Election

This for me is one of the big ‘unknowns’ – mainly because I don’t know where we will be as far as social media & political engagement will be. It’s a bit like comparing social media world in 2009 with what it is today. So much has changed. What message will the electorate send to politicians both face-to-face and over social media assuming more years of economic gloom in the meantime. Will this, as some have said be a general election about living standards? How will politicians respond given that it is likely to be much harder for them to hide behind party slogans and big names of the 1997 era?

To sum up…

The picture isn’t good. There’s far more to the report, but those are the things that jump out from a scan through. What are your thoughts? What stood out for you?

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This entry was posted in Business economics and finance, Data, science and statistics, Housing and transport, Party politics, Public administration & policy. Bookmark the permalink.

2 Responses to “It’s about living standards, stupid!”

  1. Tim Haire says:

    And you seem suprised that living standards have to go down after a 20 year credit binge?

  2. Maggie Smith says:

    No Tim it’s about how gains are distributed and the rising gap between the feral elite and those on low wages. As puffles so eloquently says, it’s a false economy to screw wages down so low because society pays in other ways , health costs, fixing stressed out families etc and loss of spending in the economy. It’s also about viscous tax evasion by individuals and corporations

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