Sunday, December 24, 2017

The Squeeze

Several key members the Social Mobility Commission (SMC) recently resigned in protest over the lack of progress towards "making Britain fairer". Alan Milburn, a Labour politician and chair of the SMC, which monitors the progress of improving social mobility in the UK, quit the Commission earlier this month along with his whole team, citing months of "indecision, dysfunctionality and lack of leadership" and stating there was "little hope" that May's administration would deliver a more equal society.

 Chancellor Hammond's Autumn Budget confirmed Britain would maintain devastating cuts to public spending while, in typical Tory fashion, hitting the poorest households the hardest.

The Resolution Foundation, an independent think tank in its report, "Freshly Squeezed",  warns that Britain is on course for its longest fall in living standards since records began in the 1950s.

The report describes the unprecedented scale of today's economic downturn and its likely impacts on public and household finances. It states that on a 10-year rolling basis, productivity growth in Britain is set to fall to 0.1% by the end of 2017, marking it as the "worst decade for productivity growth since 1812.

The British economy is predicted to be £42 billion worse off in 2022. This grim economic outlook will put more pressure on family budgets, with real household disposable incomes predicted to fall for unprecedented 19 successive quarters between 2015 and 2020.

 Changes made to tax and welfare benefits mean that the poorest third of UK households will lose an average of £715 a year by the end of Parliament, while the richest third will gain an average of £185 a year, according to the Foundation.

The Institute for Fiscal Studies warned that the uncertainty over Brexit combined with a steady loss in productivity means Britain may ultimately suffer two decades of zero earnings, estimating that due to a fall in productivity, earnings and growth through 2022, the UK's public finances will still be in the red by the middle of next decade. Average earnings in Britain are on course to be £1,400 a year lower in 2021 than what was forecast in 2016. 
IFS Director Paul Johnson explained "We are in danger of losing not just one but getting on for two decades of earnings growth. We will all have to get used to the idea that steadily rising living standards may be a thing of the increasingly distant past."

The IFS published a report predicting that the number of children living in poverty will increase to an unprecedented 2.5 million over the next five years, as government welfare cuts continue to hit poorest households the hardest. The IFS said the arrival of Universal Credit, alongside the freezing of benefits and the reigning in of tax credits, would see child poverty surge, particularly in the most deprived areas of the country. It also predicted that the gap between the rich and poor will definitively widen.

 Rising inflation in Britain is making life harder for those families, while cuts to benefits is putting additional pressure on low-income earners. A report by the Child Poverty Action Group found that a couple, in which both members work full-time jobs at the National Living Wage in 2017, will generate income that will meets only 87 percent of basic living costs. For a single parent working full-time on the National Living Wage, the figure drops to 83 percent.

Instead of raising the National Living Wage to a realistic amount in line with rising inflation, the Chancellor increased it from £7.50 an hour to just £7.83 an hour. As the Living Wage Organisation reports, the government's National Living Wage is calculated on a target to reach 60 percent of median earnings by 2020 -- not what employees and their families actually need to live on, with the price of everything from petrol to pharmaceutical prescriptions rising.

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