Executive Leader Cllr Kieran Quinn

Kieran Quinn's Blog  

Councillor Kieran Quinn

The Cost of Living Crisis Won't Wait

Wednesday, 14 June 2017

Graph mapping the annual growth in consumer prices and weekly earnings since January 06 (Source: Office for National Statistics)

Here’s a pretty uncontroversial statement: the world of today and the world of 200 years ago, when Napoleon and the Duke of Wellington strode the battlefields of Europe, are two very different places. Yet they are also alike in more ways than you’d think. Unfortunately, one of these similarities is the miserable state of wages and household finances.

The alarm was sounded back in March by the Resolution Foundation, which released figures shortly after the spring Budget claiming that the 2010s so far have been the worst decade for pay growth in Britain since the 1800s. The outlook for the rest of the decade scarcely looks better either, as the Institute for Fiscal Studies predicts that families will miss out on a further £12,000 of pay growth by 2020.

So it’s not great, you might reply, but I’ve talked about it before. Why am I bringing it up again? A bleak picture has been getting bleaker in the past few months as the Office for National Statistics confirmed that we are entering a new period of rising inflation as well. Increases in the costs of things like food, clothing and computer games helped to bump this month’s rate of inflation up to 2.9%; the highest rate since June 2013 and far higher than the Bank of England’s 2% target. It’s entirely possible that utility price rises and a continued increase in food costs could ratchet inflation up to as much as 3.25% by the autumn.

When inflation outstrips wage growth there can be only one outcome; as the value of the pound in their pocket goes down, people start getting poorer.

What makes the situation we’re in even stranger is that all this is happening during a period where the unemployment rate is the lowest it’s been since 1975. Back then, increases in the cost of living were matched by demands from employees for higher pay. It speaks volumes about the state we’re in when employees are unwilling or (more likely) unable to press for higher pay even though jobs are fairly plentiful and they’re facing severe cost of living increases.   

Solving this stagnation of wages while maintaining employment will probably be one of the great economic challenges of our time, but if we want to remain a country that offers a fair day’s pay for a fair day’s work it is a challenge that we have to meet. No one plan by itself will provides a lasting solution, but I can think of a number of approaches that can (and should) be taken simultaneously.

We need to recognise the importance of the public sector investing to boost productivity, particularly in infrastructure, and compel government (local and national) to back up the rhetoric we’ve begun to hear recently with genuine financial action. We need to tackle a system of executive pay that too often encourages businesses to inflate their short-term share price (and, by extension, their own pay and bonuses) over spending on productive investment. We need to raise education and skills, particularly increasing the quality and quantity of apprenticeships on offer for those who can’t or won’t go through university.

There is little time to waste. The current weakness and instability in Westminster might be dominating the headlines, but the cost of living time bomb of rising inflation and stagnant wages will not wait for the government to get their house in order. For the sake of society and basic decency, we cannot afford to leave anybody behind as we seek to build a new economy for the 21st century.

Posted by: Kieran Quinn

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