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It is how George tells them PDF Print E-mail
Written by John Boardman   
Monday, 21 April 2014 19:18

According to George Osborne the austerity measures are working and things are starting to get better. This is based on the announcement that the UK inflation rate, as measured by the Consumer Prices Index (CPI), fell to 1.6%. This is the sixth consecutive month that the rate of inflation has fallen, marking the longest consecutive fall since modern records began. Wages (with bonuses) increased by 1.7%.

Depending upon your circumstances, you may be feeling better off and you may agree with George. On the other hand if you still find yourself struggling to cope with the biggest decline in living standards since Victorian times you may be wondering why this ‘recovery’ is passing you by!

The reality is that the official inflation statistics manifestly fail to reflect the real cost of living for the workers and poor. The government’s favoured measure of inflation (CPI) specifically excludes housing costs, yet working families in the UK spend 40% of their income on housing, making UK housing the third most expensive in Europe. This is a product of our acute housing crisis, with skyrocketing rent and house prices making the roof over our heads increasingly unaffordable. This means over a million working families are now reliant on Housing Benefit to pay their rent, an increase of over 50% from 2010. Such is the horrendous cost of housing that the homelessness charity Shelter has produced a report (http://www.bbc.co.uk/news/business-27015809) that shows 3.8 million families are just one wage packet away from losing their home. George’s coalition government remains unable  or unwilling to tackle the housing crisis.

If we look a little further, the more favourable relationship between CPI and wage increases is not because wages have started to increase meaningfully, it is because (CPI) inflation has gone down - which is itself a sign of the continued depression in the economy, with the excess capacity in production putting a competitive downward pressure on prices.

In short: wages with bonuses (did you get one?) increased by 1.7% - wages without bonuses increased by 1.4% - CPI inflation fell to 1.6% - increases in housing costs are not included in the CPI.

I wouldn’t open that bottle of champagne just yet!


 

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