How Osborne disguised the truth about living standards

The Chancellor boasts in his Times piece that disposable incomes have risen but in the first quarter of this year they fell at the fastest rate since 1987.

With the return of the economy to something close to normal levels of output, attention has quickly shifted to the nature of the recovery. Is it balanced or unbalanced growth? Is it a recovery for the few or one for the many?

In his response to the GDP figures yesterday, Ed Balls emphasised that while the economy is growing (albeit after three years of stagnation), most people's real incomes are still shrinking. He said: "Families on middle and low incomes are still not seeing any recovery in their living standards. While millionaires have been given a huge tax cut, for everyone else life is getting harder with prices still rising much faster than wages."

But in a column in today's Times, George Osborne declares that the government is ensuring that everyone, including low-earners, benefits from the recovery, noting that "inequality is at its lowest for 25 years and disposable incomes grew by 1.4 per cent above inflation last year despite the squeeze, the fastest for three years". 

So who's right? The figures cited by Osborne are correct but they offer a highly partial picture. First, based on the most common measure - inflation - most people's pay is still falling, as it has been since the crash. In the year to May 2013, total earnings rose by just 1.7%, more than two percentage points below CPI inflation (2.9%). Since the election, average pay has fallen by £1,350 a year in real terms, with most now earning no more than they were in 2003. And the situation is unlikely to improve anytime soon. Wages aren't expected to outstrip inflation until 2015 at the earliest and earnings for low and middle income families won't reach pre-recession levels until 2023

But even if we accept Osborne's metric of choice - real household disposable income - the picture isn't as rosy as the Chancellor implies. Household incomes did increase by 1.4% in 2012 but they went on to fall by 1.7% in the first quarter of 2013, the largest quarterly drop since 1987. 

As for inequality, Osborne won't be able to masquerade as an egalitarian for long. While inequality has fallen to its lowest level since 1986 (owing to a combination of lower wages for middle and high income earners, the automatic stabilisers and the rise in the personal tax allowance), it is expected to rise from now on as the welfare cuts bite. In particular, Osborne's decision to cap benefit increases at 1 per cent for at least three years (an unprecedented real-terms cut) means the poorest will see a steep fall in their incomes. The IFS expects inequality "to rise again from 2011–12, almost (but not quite) reaching its pre-recession level by 2015–16."

The Chancellor might want to have a good story to tell about living standards and inequality, but he'll need to change his policies first. 

George Osborne delivers his Mansion House speech on June 19, 2013 in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Felipe Araujo
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Hull revisited: What happens when a Brexit stronghold becomes City of Culture?

We report from Hull, to find out if you can replace the kind of nostalgia that led to a Leave vote with cultural investment.

At 75 metres long, the offshore wind turbine blade erected across Queen Victoria Square, in the heart of Hull, is a sculpture intended to mark a new chapter in the city’s history. For the next 12 months, Hull, a city of more than a quarter of a million people in the northeast of England, will be the UK’s City of Culture.

The 28-tonne blade hails from the local Siemens plant. The German technology company employs around 1,000 people in the area, making it Hull’s biggest single employer.

Seen up close in this context – laid dormant in the middle of a town square instead of spinning up in the air generating energy – the structure is meant to remind passersby of a giant sea creature. It is also, I’m told, an allusion to Hull’s rich maritime history.


All photos: Felipe Araujo

Nostalgia is a big thing in this part of the country. At one point, Hull was the UK’s third largest port but technology and privatisation drastically changed that. The battle over cod fishing with Iceland in the waters of the North Sea 40 years ago has also dealt a major blow to a region with a long and proud trawling tradition.

People here still talk about a bygone era when the fishing industry provided jobs for everyone and there was enough money to go around.

Fast forward to 2017, and the country’s new capital of culture is the same city that voted 67 per cent in favour of leaving the EU last June. Its new-found prestige, it seems, is not enough to erase years of neglect by a political class “too busy for commoners like us”, as one resident puts it.

“More than a message to Brussels, it [the Brexit vote] was a message to Westminster,” Paul Leeson-Taylor, a filmmaker born and bred in Hull, tells me. “For the first time in a long time people in Hull felt like they had the chance to change something, and they took it.”

But while speaking to people on the high street and hanging out with locals at the Community Boxing Club in Orchard Park, one of the city’s most deprived areas, there is one word that consistently popped up in conversation – more than any specific policy from Westminster or the much-hated rules “dictated” by Brussels. Foreigners.

According to official figures, Hull’s population is 89.1 per cent white British. Still, immigration is big on people’s minds here.

During my two-day stay in the city, I find myself being the only black person in most places I visit – I’m certainly the only black guy at the boxing club. So when someone begins a sentence with “I’m not racist but…”, I know a tirade on immigrants is about to ensue.

“There are just too many of them,” Nick Beach, an estate agent whose Polish clientele is a big part of his business, tells me as he is about to teach a boxing class to local children. Beach was born in Shepherd’s Bush, in West London, but has been living in Hull for the last 20 years.

“When I go down there these days and go into Westfield shopping centre, it is very rare you get an English person serving you now,” he says. “I just find it disappointing that you go into your capital city and you are a minority there.”

These are the much-discussed “left behind”, a white working-class community that has gained particular prominence in a time of Brexit and Donald Trump. Under economic pressure and facing social change, they want to have their say in running a country they claim to no longer recognise.

For Professor Simon Lee, a senior politics lecturer at the University of Hull, immigration is only a superficial layer when it comes to explaining the resentment I witness here. For him, the loss of the empire 70 years ago is still something that as a country Britain hasn’t come to terms with.

“The reason for us to be together as a United Kingdom has gone, so what is the project?”

As destiny would have it, a foreign company will now play a major role on Hull’s economic future, at least in the short term. In the wake of the Brexit vote, there were widespread fears Siemens would pull out of the region and take its factory elsewhere. With the massive blade looming large in the background, Jason Speedy, director of the blade factory in Hull, assures me that isn’t the case.

“The Brexit decision has made no difference. We have made our investment decision, so Siemens, together with the Association of British Ports, has put in £310m. It’s all full steam ahead.”

As Hull becomes the country’s cultural hub for the next few months, the hope is that its residents stop looking back and start looking forward.

For Professor Lee, though, until there is a complete change in the power structures that run the country, the north-south divide will remain – with or without the EU. “The way you kill nostalgia is to have something new,” he said. “The reason why people here are nostalgic is because there is nothing to replace it with.”

Felipe Araujo is a freelance journalist based in London. He writes about race, culture and sports. He covered the Rio Olympics and Paralympics on the ground for the New Statesman. He tweets @felipethejourno.