Cameron the worst PM for living standards in history


8:06 am - August 6th 2013

by Sunny Hundal    


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An analysis of figures from the Office for National Statistics out today show that David Cameron has been in Downing Street for 36 months of falling real wages – more than any Prime Minister on record.

No other British PM has seen so many consecutive months of falling real wages, where the annual rise in wages is lower than the rate of inflation.

Prices have risen faster than wages in all but one month since May 2010 – in April 2013 when he cut taxes for millionaires and bank bonuses soared.

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The analysis, published by the Labour party today, shows that average earnings are £1,350 a year lower than they were at the time of the last General Election. This means workers are on average earning today the same as they made in 2001.

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Over the last three years since this Government came to office, no other G7 country has seen workers’ incomes in real terms fall by as much as the UK.

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The Labour party will focus on living standards as a response to claims that the economy is recovering, pointing out that the so-called ‘recovery’ is not helping low and middle-income families.

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Sunny Hundal is editor of LC. Also: on Twitter, at Pickled Politics and Guardian CIF.
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Reader comments


[deleted]

MOCO – do you deny that real wages in the UK, taking into account price increases in food, fuel and housing costs, have fallen dramatically since 2010? When Cameron took over in No.10, the economy was showing signs of recovery: it’s taken since then to now to get back to where we were when the Tories took over. Maybe.

The figures above are undercooking the real situation, if anything. The rise in basic necessities is far higher than the headline CPI.

[deleted]

The Labour party will focus on living standards as a response to claims that the economy is recovering, pointing out that the so-called ‘recovery’ is not helping low and middle-income families.

It’s a risk though isn’t it? After going on for three years with Ed Balls’ flatline gestures and gibes about how all that mattered was going for growth, it’s a bit of a volte-face to say that actually growth doesn’t matter and what matters is to whup inflation.

Mid you, it looks as though Labour abandoned that line of attack in the nick of time:

The Markit/CIPS services purchasing managers’ index leapt to 60.2 in July from 56.9 in June, its highest level since December 2006 and a bigger gain than forecast by any of the economists polled by Reuters.

The index has been above the 50 mark that divides growth from contraction for seven months, and the rise follows strong gains in equivalent manufacturing and construction surveys.

Taken together, the data give the highest composite PMI since the series started in 1998, suggesting economic output from July to September is well-placed to beat the 0.6 percent recorded for the previous three months.

http://uk.reuters.com/article/2013/08/05/uk-britain-services-pmi-idUKLNE97400520130805

Labour might have to factor in the sort of substantial and consistent growth that they said was impossible.

5. David Gillon

My overwhelming reaction on reading the Labour Press release is sadness that yet again Labour seem to be saying that the only people on whom the impact of austerity is worth mentioning are those who are in work.

For many disabled people who are unable to work the impact of cut after cut doesn’t just mean belt-tightening, it means catastrophic changes in their ability to live independently, with some being told they face being institutionalised if their care needs are too expensive and others being told that being expected to lie in their waste all night is a perfectly legal standard of care. The DWP estimates that 427,000 disabled people will lose the Higher Rate Mobility Component as part of the switch from DLA to PIP, and for many of those people that will mean losing their access to cars or wheelchairs leased through the Motability scheme, and with them any hope of being able to access the community, or their job if they have one.

Imagine facing these cuts as a change in your ‘living standards’, and wonder why Labour has turned their back on making it a priority.

6. Luis Enrique

Tim J,

of course growth is better than no growth, but it is nowhere near sufficient to vindicate the government

http://mainlymacro.blogspot.co.uk/2013/08/confusing-levels-and-rates-of-growth.html

see last para especially.

[deleted]

“Cameron is the worst British PM for living standards in recorded history”

Perhaps recorded history doesn’t extend as far back as 1945.
For if it did Sunny would surely have to be writing that Clement Attlee was the worst PM for the continuation of rationing, shortages, declining production etc etc.

Which is just as silly as this article itself.

Why would an employer pay decent wages then there’s such a surfeit of supply?

@9

What do you define as a decent wage? If you have a choice of either receiving a low wage or no wage then surely the wage is ‘decent’?

11. Shinsei1967

As some of us have been saying for the last couple of years the real economic headwind faced by the UK is not “austerity” but high inflation.

Unfortunately apart from the VAT increases of recent years and tuition fee hikes the main drivers of higher inflation are largely out of the UK’s control – namely higher oil, gas and imported food prices.

The collapse in sterling following the banking crisis has also not helped matters, but higher interest rates to counter sterling collapse would have made the economic situation even worse.

So, while it is nice to flag up the problem of high inflation does the Labour Party have any actual solution ?

Judging by reports in the news, the official Conservative line is not to deny that living standards have fallen and to blame the last Labour government for that.

In the FT, Bob Diamond, head of Barclays Bank, was reported as saying in a BBC Today interview on 4 November 2011 that the Banks must accept responsibility for what went wrong. In the interview – which I listened to – he repeatedly said that banks must work towards a situation where banks could be allowed to fail without taxpayer support and without causing systemic instability if they did fail – try: Barclays chief rediscovers remorse.

The failing of Labour was in allowing a house-price bubble to continue to inflate in spite of warnings in The Economist going back to 2002. The trouble is that house-price bubbles are very popular with home owners and the Conservatives were repeatedly calling for more deregulation and cutting red-tape. The Economist: Going Through The Roof [28 May 2002]

People have “every right to be angry” with banks for the UK’s financial crisis, the outgoing Bank of England (BoE) governor Sir Mervyn King says.

In one of his last interviews before stepping down, for BBC Radio 4’s Desert Island Discs, he expressed sympathy with public frustration as slow growth takes its toll on living standards.
http://www.bbc.co.uk/news/business-22732399

9. DtP

Why would an employer pay decent wages then there’s such a surfeit of supply?

No reason at all. In fact that’s exactly what a lot are doing with offering interships. Karl Marx wrote an interesting book about it.

In the news:

They won’t be lovin’ it: McDonald’s admits 90% of employees are on zero-hours contracts without guaranteed work or a stable income
http://www.independent.co.uk/news/uk/home-news/they-wont-be-lovin-it-mcdonalds-admits-90-of-employees-are-on-zerohours-contracts-without-guaranteed-work-or-a-stable-income-8747986.html

15. Rod Robertson

on behalf of Toom Tabbard Broon I claim the title of worst PM ever.
How dare you suggest Dave Boy is worst.
I take it no polls on worst ever Deputy PM.

In the short run, you have a choice. Lower median wages or fewer jobs. I think more jobs, lower wages is probably more equitable in the short run and probably bodes better for the long run too as unemployment has durable effects on people’s future ability to work and earn.

This is yet another hostage to (good) fortune for labour. Wages might well rise (or already have risen) due to the surge in economic growth.

17. Shinsei1967

Nick is of course right, this line of argument is somewhat short-sighted for Labour. Lower real wages is what is required in wake of a financial crash and to promote a rebalancing of the UK economy.

The flexibility of the UK labour market to accept lower real wages results in people keeping their jobs and more new jobs being created. Compare and contrast the situation in the UK with the far more rigid labour markets of Europe.

Lower real wages makes UK a more attractive location to manufacture goods or start a business. Look at the number of manufacturing businesses that are now reshoring back from Asia as the relative wage differentials makes homne-produced manufacture more attractive.

Keynes accepted that real wages would need to fall in a recession for employment to increase – the policy challenge was how to get there.

The real issue here is the duration of slow growth since the start of the financial crisis in 2008 as compared with other G7 economies and the low productivity per hour worked in the British economy.

Try Sam Brittan in the FT on 28 June 2013: Britain let down by its bean-counting politicians

Compare the success of different countries in emerging from the Great Recession.

The clear winner among the Group of Seven rich countries is Canada, where output is 5 per cent above the its previous peak. (But I will not go on about it lest it look as if I am trying to curry favour with Mark Carney, the retiring governor of the Bank of Canada, who takes over at the Bank of England next week).

Next in line is the US, where output is 3 per cent above its previous peak. This is not bad going for a country whose much maligned constitutional arrangements split responsibility for economic policy between the presidency, the Federal Reserve and two Houses of Congress – themselves often divided in their partisan allegiance. Well behind is Germany with just over 1 per cent.

We strike negative territory with France, where output is nearly 1 per cent below its previous peak; and then descend to the UK, where the shortfall is almost 4 per cent. Bottom of the class is Italy, with a fall of nearly 9 per cent. The well known structural problems of that country are confounded by its being locked into the euro, with the escape route of devaluation shut off.
http://www.samuelbrittan.co.uk/text460_p.html

Productivity per hour worked in Britain is lower than in other G7 peer-group countries:

– Output per hour in the UK was 16 percentage points below the average for the rest of the major industrialised economies in 2011, the widest productivity gap since 1993. On an output per worker basis, UK productivity was 21 percentage points lower than the rest of the G7 in 2011.

– In 2011, UK output per hour grew roughly in line with the average of the rest of the G7, and faster than the US and Germany. UK output per worker was broadly unchanged between 2010 and 2011.

– Since 2007, growth of UK output per hour and output per worker has trailed that of the US, Japan and Canada, but has been broadly similar to that of Germany and Italy. Thus the ‘productivity conundrum’ is not unique to the UK.

– Outside the G7, UK output per hour in 2011 was significantly lower than in the Netherlands, Belgium and Ireland, and a little lower than Spain. Since 2007, growth of output per hour has been sluggish in Belgium and the Netherlands, but has recovered sharply in Spain and Ireland.
http://www.ons.gov.uk/ons/dcp171778_299752.pdf

News update:

“For the year as a whole, NIESR predicts growth of 1.2 pc, rising to 1.8pc cent in 2014. However, the think-tank does not expect the UK’s economic output to pass its early-2008 peak until 2015.”
http://www.telegraph.co.uk/finance/economics/10225737/UK-economic-recovery-gains-pace-in-July-says-NIESR.html

21. Sandra Humphries

Will the people who are so keen to advocate a reduction in wages be first in line to have theirs cut? Thought not!

“Will the people who are so keen to advocate a reduction in wages be first in line to have theirs cut?”

Compare this in the news:

Who is getting the most money at Britain’s biggest aid charities

The Daily Telegraph has analysed the the reports and accounts for the past three years of the 14 charities which comprise the Disaster Emergency Committee for each the past three years.
http://www.telegraph.co.uk/news/politics/10223961/Revealed-who-is-getting-the-most-money-at-Britains-biggest-aid-charities.html

Could falling living standards possibly be connected with deficit?

“Sorry, there is no more money. BR”

Just an innocent question.

Unlikely I know. As GB abolished boom and bust.

Does this fall in real income (which I have experienced) also apply to executives? I’d be more sanguine about it if that was the case…

25. Paul peter Smith

@24
Its called equality of sacrifice, we take a pay cut/freeze at a time when the cost of everything is rising but they only get a 16% pay rise and only very modest bonuses (barely 6 figures poor dears).

@25
Only 16% rise and 6 figure bonuses? I feel their pain, I really do…

27. Paul peter Smith

And lets not forget our political masters, how much do they want again? You can always count on our shower to lead from the front in times of national peril!

The pain:

EUObserver: British bankers dominate Europe’s financial sector rich-list, according to data published on Monday (15 July) by the bloc’s banking watchdog.

Data collected by the European Banking Authority (EBA), the EU agency that serves as the sector’s watchdog, notes that 2,346 British-based bankers earned more than €1 million in 2011.

The figure is more than three times as many as the 739 millionaire financiers across the rest of the EU and more than 10 times as many as Germany, second on the list, with 170.
http://euobserver.com/economic/120877

29. Shinsei1967

@ Bob B

What’s your point ? All you appear to be doing is highlighting that London, being Europe’s financial capital, has the lion’s share of well-paid bankers.

The only relevant point about bankers and this post is whether bankers are also seeing real wage cuts, along with the rest of the working population.

And seeing as bank bonues were £12bn in 2007 and are less than £4bn this year then they would appear to be suffering (relative) pain too.

I will take the most enormous pleasure watching Ed Balls twist and squirm.

It honestly could not happen to a better man.

End of boom-and-bust : Myth destroyed.
Too far, too fast : Myth destroyed
Mass-unemployment : Myth destroyed
Flat-lining growth: Myth destroyed

In fact, Ed Balls is almost as incompetent as Danny “100% wrong” Branchflower.

Where are Danny’s “5 million unemployed”

*snork*

Shinsei: “What’s your point ? All you appear to be doing is highlighting that London, being Europe’s financial capital, has the lion’s share of well-paid bankers.”

I’m really surprised at that comment. There are many more issues than you suggest: (a) whether bankers’ bonuses promote higher risk investment decisions if bankers are not penalised for downside outcomes, as well as for mis-selling and for insider trading; (b) whether British bankers are over-paid as compared with bankers in the rest of the EU, which has made British banks more prone to be unstable through the creation of asset-price bubbles.

According to press reports, Lloyds Banking Group is paying out £7.3billion in compensation for mis-selling Payment Protection Insurance to its depositors, which is an awful lot of compensation and more than other banks are having to pay out.

As for insider trading, which is costly to investigate and challenging to prosecute:

“A City banker who amassed almost £600,000 through insider trading with his wife and a friend has been jailed for three years and four months.” [BBC website 2 February 2011]

“Six people have been convicted of insider dealing in a case brought by the Financial Services Authority.” [BBC website 23 July 2012]

“A former senior partner at accountancy giant KPMG has agreed to plead guilty to insider trading” [BBC website May 2013]

And there is the opportunity for fraud: “Ex-Lloyds security boss Jessica Harper jailed for £2.5m fraud” [Independent website 21 September 2012]

To mention but a few worrying issues.

32. Shinsei1967

@Bob B

Those are all important questions to be asked about banking and bankers. I’m just not sure what the connection is with an article about falling living standards.

Whether UK bankers are overpaid compared to European bankers also isn’t that relevant with your earlier point about more millionaire bankers being in London than Frankfurt.

The point being that Deutsche Bank’s Head of Derivatives (who may or may not be a German citizen) will be based in London. It just isn’t a job that exists in Germany.

Shinsei: “Those are all important questions to be asked about banking and bankers. I’m just not sure what the connection is with an article about falling living standards.”

Bankers in Britain have continued to do well in spite of the financial crisis for which bankers were responsible – hence this news report:

Mervyn King is surprised anger at bankers is not greater

Mervyn King, the Governor of the Bank of England, said he is surprised that the public is not more angry with bankers as they face a fall in living standards.
http://www.telegraph.co.uk/finance/economics/8354727/Mervyn-King-is-surprised-anger-at-bankers-is-not-greater.html

HSBC is the largest bank in Europe: “HSBC has confirmed it is to pay US authorities $1.9bn (£1.2bn) in a settlement over money laundering, the largest paid in such a case.” [BBC website 11 December 2012]

Btw “Bank loans to business fall again despite Funding for Lending” [BBC website 3 June 2013]

34. Shinsei1967

@Bob B

I don’t disagree with you with any of your complaints about banks or bankers.

I’m just disputing that bankers haven’t also been relatively hurt in last few years.

I quoted that City bonuses are a fraction of 2007 levels. There’s been 100,000 job losses in the City. And a similar number at High St level. Most of the senior bankers around in 2007 have all left the industry.

The latest CEO of RBS is getting paid £1m less than his predecessor.

Now, no doubt most here would demand even further pay cuts, but pay cuts and job losses have happened in banking and at a greater rate than job losses and pay cuts in the economy as a whole.

35. Charlieman

@34. Shinsei1967: “There’s been 100,000 job losses in the City. And a similar number at High St level. Most of the senior bankers around in 2007 have all left the industry.”

Any idea, Shinsei, what the 100,000 City job losers might be doing? I don’t expect you to know detail and I understand the limitations of anecdote. I’m just wondering why their changing lives have escaped press reporting.

36. Shinsei1967

@Charlieman

Just in case anyone doubts the 100k figure of City job losses, here it is written up in the Guardian. Currently 250k, from peak of 350k (so a near 30% fall).

http://www.theguardian.com/business/2012/nov/06/city-jobs-slump-low

What are they all up to ? I haven’t seen any data on this, but from anecdotal experience and educated guesses I would suggest:

1) The (well-off) senior, middle aged bankers have just taken early retirement earlier than they had planned. Possibly doing a little consultancy work to give them something to do.

2) About a third of City bankers aren’t British. So many will have returned home to France or Australia or USA.

3) The well-qualified youngish bankers with maths & physics degrees probably had no difficulty being hired by other industries.

4) Esoteric mix of “things I always wanted to do if I wasn’t working 12 hour days in City” – small scale farming, art galleries, restaurants, landscape gardening, book shop etc. City salaries and booming London property prices means often enough capital to get a small business started.

5) And some will be sitting at home, having fired off 100 CVs, phoned every contact they have, quickly working their way through redundancy payment with large mortgage, shopping at Tesco rather than Ocado hoping that something will turn up.

37. Charlieman

@36. Shinsei1967:

Thank you, noting anecdotalism.

@37

I consider the anecdotes to be a logical inference. Whether they are true is another concept. However I doubt whether those impoverished by policies pursued by said former bankers is quite so (what’s the word?) positive as that!

39. CloseShave

Canada is utter bullshit!

They are only demanding huge wages cos Carney left them in a worsening, massive housing bubble (like UK around 2006)
(A ‘zionist’ timed housing bomb about to blow up)

Confirmed with regular Canadian financial posters with fingers on pulse over there (who know what’s what)

40. CloseShave
41. CloseShave

Quoting the occultist Keynes is the thick twat’s eco-folly

Nothing applies
– when bent, thieving elites are vacuuming up every penny from local/national economy

That’s all very well, as far as it goes, but what about those who are forced to rely on benefits or other unearned income? What about sick & disabled people who don’t or can’t work? Don’t their lives/living standards matter? All political parties are perpetuating the idea that the only citizens who matter are those who are able to work for money. Discriminatory, cruel and ultimately very unwise.

I don’t see anyone talking about how “work” can be changed to include people who can’t do the kind of jobs that employers are offering. I don’t see anyone talking about retraining people who’ve always done physical jobs so they can do sedentary, phone or IT based jobs. I just don’t see anything realistic to replace the utter despair facing sick & disabled people.

Until the main parties get real about the idea of representing EVERYONE, they have little to offer.

43. mick perrin

what can you expect from someone who has gone on holiday again while people are struggling to pay bills let alone have a holiday.I am 66 and still working as I cant afford not to. I,m not worried about British people claiming benefits, what I do worry about is all the immigrants claiming.there has to be a reason why they are queing up in France to get here.they know this country abides by the EU rules whereas other countries dont want to know. the sooner we get out of EU the better as far as Im concerned


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