UK economy: Squeeze is far from over, says Andrew Neil

 

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I flew out of New York last night reading a New York Times report about collapsing living standards in Middle America to arrive in London to a similar story about Britain.

Between June 2009, when the US recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7%, to $49,909, according to a study by two former Census Bureau officials.

During the recession - from December 2007 to June 2009 - household income fell 3.2%. Taken together, US median incomes have fallen by almost 10% from the start of the recession four years ago, a huge fall which those who wrote the study describe as "a significant reduction in the American standard of living."

It is also a vivid illustration of a phenomenon I've mentioned on the Daily Politics: that for most folk, the recovery is turning out to be worse than the recession!

Belts are being tightened on this side of the Atlantic too. Falling incomes in this country will mean the biggest drop for middle-income British families since the 1970s - and will push 600,000 more children into poverty, says a report from the Institute for Fiscal Studies (IFS).

Start Quote

Most families are preparing this winter to tighten that belt another notch”

End Quote Andrew Neil Daily Politics and This Week presenter

The IFS forecasts two years "dominated by a large decline" in incomes. As a result, by 2013 there will be 3.1 million children in poverty in the UK, according to the IFS projections.

The IFS figures are yet another example of the tough times for people in the "squeezed middle" - with median incomes falling by 7%, says the IFS, after inflation has been taken into account, the sharpest drop in 35 years.

So times are tough for those on middle incomes and below in America and the UK.

On top of the economic distress this causes families struggling to make ends meet on falling real incomes, there is the wider economic consequence: when incomes fall and borrowing is no longer an option, people curb their spending - and with consumer spending accounting for almost 70% of our GDP, when people cut spending the economy stops growing.

The squeeze on middle and below-middle incomes is probably the single biggest reason why both the US and UK economies are flat-lining, with growth forecasts for both being consistently downgraded.

The bad news is that the squeeze is far from over. Most families are preparing this winter to tighten that belt another notch.

 
Andrew Neil Article written by Andrew Neil Andrew Neil Daily and Sunday Politics

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  • rate this
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    Comment number 69.

    Dear Andrew,
    can you tell me which safe seat in England has been put aside for
    Danny Alexander ? If he is facing a "run-off" with Charles Kennedy
    he is going to lose his seat for sure. Plus Scotland might even lose
    it's token Tory MP as well as about six Labour MPs.
    Cue crocodile tears.

  • rate this
    0

    Comment number 68.

    66.Chris London
    I don't know the source of those figures, but I wouldn't call a net loss of 70,000 jobs acceptable in any way. I don't remember anyone saying they are in favour of creating "non-jobs". What I object to is the attack on the public sector, in a climate where finding work is so tough. People are being plunged into poverty to satisfy this millionaire-heavy government's ideology.

  • rate this
    0

    Comment number 67.

    What is amazing is that consumer businesses seeing falling sales react by freezing wages, initiating redundancies and then state they do not understand why people are not buying.
    70% of UK GDP is in the consumer spend and this also accounts for the largest employer .If these companies continue to squeeze their employees in order to maintain profit margins and share prices how can things improve?

  • rate this
    0

    Comment number 66.

    65.blueboy74
    I think that you will find if you bother to do any research that the public sector lost just over 110,000 jobs while the private sector created over 40,000 jobs. So some of the slack is being taken up. I would agree that there is still too much of a gap but you can't just creating non jobs, that is just not sustainable and gives us the wrong idea on how things really are.

  • rate this
    -2

    Comment number 65.

    This government's response to the economic crisis has been absolutely disgraceful. Dumping thousands upon thousands of public sector workers on the dole with vague, unfounded assurances about how the private sector will "take up the slack". But there are absolutely no signs of growth in the private sector, and the bailed-out banks who caused all this refuse to help put things right. What a mess.

 

Comments 5 of 69

 

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