Category: National politics

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Ealing North MP Stephen Pound is a great performer and today when he asked a question at Prime Minister’s questions, Parliament went quiet to hear him. Somebody had to ask the Beer and Bingo question and the task fell to Pound.

By the end even Pound had to acknowledge that the Prime Minister had bested him. David Cameron told him:

I am sure the Right Honourable Gentleman sitting opposite enjoys a game of bingo. It is the only time he ever gets close to Number 10.

Push the slider to 12:12:30.

I wrote in January about how Labour was twisting the facts about energy prices.

A short report produced by ONS yesterday shows that domestic energy expenditure has been relative flat recently. It shot up under Labour, going up 52% in real terms between 2004 and 2009. The report’s headline number is spending up 55% in real terms between 2002 and 2012. Strange they didn’t want to identify the steep bit of the graph more prominently although the steep bit is discussed in the detail.

The ONS says:

Most of the increase in average spending on energy came between 2004 and 2009, reflecting the significant increases in energy prices which occurred over this period. By 2009, the average household spent the equivalent of £108 a month (in 2012 prices) on energy. Since then, there has been relatively little change in the average monthly spend on energy.

The limited change in expenditure since 2009 may be explained by a combination of factors, including a fall in domestic energy prices in 2010, and price rises in subsequent years appearing to be offset by lower energy use, partly due to milder winter temperatures.

It is clear that if you want to blame a party for high energy bills rather than world markets and a host of other factors then that party should be Labour.

This weekend Labour has been running a campaign called the Cost of Cameron. If you had a Labour canvasser knocking on your door he or she might have pushed a card into your hands with this seen-it-before bomb graphic on it.

The reverse has 12 factoids that ram home Labour’s cost of living message. In the posts below this one you will find analysis of these.

Maybe I shouldn’t help Labour by debating on their ground but once you scratch beneath the surface of some of these statements two basic truths emerge.

Firstly, we had a big recession in 2008, Labour’s 7.2% single dip recession. It was painful and wage growth has been stunted since then. The good thing is that unemployment has remained relatively low and this has been a good recession in employment terms compared to previous ones. Is Labour saying we should chuck a few 100,000 people out of work and enjoy some robust wage growth for the lucky ones that remain?

Secondly, many prices eased off in 2009 and 2010, as a result of Labour’s 7.2% single dip recession. Now prices are getting back onto a similar track to that which they were on before the recession Labour is trying to kid us that we have lost some kind of low price Labour golden age. The charts show prices were rising just as much if not more when they were in charge as they are now. Energy prices in particular increased more before the recession than they are now.

Having lost the macroeconomic argument on whether Plan A is working or not Labour has alighted on the cost of living as its latest weapon of choice. Labour is doing what the left always does when it loses an argument, it changes the subject. Having changed the subject, it seems their cost of living schtick doesn’t work that well either.

I can’t find where Labour got its number from but it looks about right. If you have a child under 2 in 25 hours of childcare you will be spending £5-6K a year, more in London. These bills have been increasing by 5% or more a year for a decade. The Family and Childcare Trust have been tracking childcare bills methodically since 2001. They say in their latest report for 2013:

A nursery place for a child aged two or under is now 77 per cent more expensive in real terms than it was in 2003, with similar rates of increase for children cared for by childminders. An after-school club is now 88 per cent more expensive in real terms than it was in 2003.

These are big bills, painful and rising fast to be sure. But their graph (on page 11) tells the story – a straight upward line. It was no different under Labour. There is an active political debate around this topic but it is clear that there is nothing new about this. Labour’s solution seems to be make it all go away by having government paying the bills, for those over 2 at least. Not sure how that will tackle the root problem of spiralling labour costs (77% of nursery costs are labour). It will merely nationalise it.

The lynch pin of Labour’s mendacious #CostofCameron campaign is this claim.

The £1,600 number used here has already been partially debunked by the Full Fact website. Labour compared average earnings and RPI and worked out that earnings have fallen short of RPI to the tune £1,600. They ignore of course that RPI is a redundant index and that under a more realistic index the loss of earning power would be about £1,000. Labour also ignores that the Coalition has ramped up the personal allowance from £6,475 to £9,440 in three years (worth £593 to most average earners). At the same time the Coalition can boast that for many people mortgage rates have stayed stable due to their macro economic policies. There are lots of swings and roundabouts in this calculation but Labour is exaggerating wildly.

Is it any surprise that wages are under pressure after Labour’s 7.2% single dip recession? The alternative is probably to have higher wage growth and much higher unemployment.

One of the good features of this economic cycle has been that jobs have held up throughout. In a trade off between stagnant earnings and high job losses I think that many of us would say that stagnant earnings is the lesser of two evils. Is Labour really arguing that wage inflation, the scourge of seventies Britain, should let rip pricing 100,000s out of jobs?

As a part of its mendacious #CostofCameron campaign Labour is talking about rail fares.

The basic claim is accurate. The last four price rise added (multiplied in the case of % rises) together come to 20.5% although you could quibble that the 2011 rise was almost certainly in the system and locked in before the Coalition had any chance to influence it. Which is a clue to the greater truth. These figures from Railfuture tell all.

This year’s rail fare rise was the lowest real terms price increase for 11 years if you think RPI is the measure of choice for inflation (as people do when they want inflation to be high). It was also the 2nd lowest nominal rise for 11 years.

Both Labour and the Coalition stuck to rail fare price increases of RPI+1 for ten years from 2004 in the belief that the burden of paying for rail transport should be shifted from the state to the passenger. This is the first year that the rise has been restricted to RPI rather than RPI+1.

So the Cost of Cameron is lower this year than the Cost of Blair and the cost of Brown. If the Cost of Miliband is going to be lower perhaps he will explain how it will be paid for?

This busy little graph is a swizz two times over. First swizz is that it compares wages with RPI which is the largest measure of inflation you can find. So Labour overstate their case. The second swizz is that it leaves out what happened to the left of this picture which only starts in May 2010.

I chose this graph from JP Morgan Asset Management because it is nice and clear and puts Labour’s graphic into context. This picture makes it clear that wage growth fell below inflation in mid-2009 when the lines crossed but wage growth turned down markedly in early 2008. What happened then? Oh yes! Labour’s 7.2% single dip recession.

Wage growth in the UK had already been very muted in the UK throughout the noughties due, in most people’s minds, to the availability of cheap, skilled Labour from the A8 countries, notably Poland, who were entitled to work here from 1st May 2004. Labour’s “spectacular mistake” as described by Labour’s Jack Straw. The recession knocked wage growth back even lower and it hasn’t recovered yet.

Who knows where this factoid came from? It is £80 a month. Is it the increase in average rents since the election? I have searched for this and I can’t find it anywhere. Maybe someone from the Labour party will tell us their source for this? It is almost certainly nonsense. Most of what is talked about rents is estate agents trying to talk up their market – and by definition nonsense.

The ONS is developing a new Index of Private Housing Rental Prices. They calculate this by asking actual tenants what they pay. They have figures going back to the start of 2005 that show that rents in England have increased steadily except for a short pause in 2009 & 2010 caused by Labour’s 7.2% single dip recession in 2008. Yes rents are going up. Does it look any different to the late noughties under Labour? No. Indeed rents are probably going up slower outside London than they were under Labour. Rents would be pushed way higher if we lost control of interest rates.