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Article by Holger Breinlich, Elsa Leromain, Dennis Novy and Thomas Sampson. On 23 June 2016, the UK voted to leave the EU. As soon as the result became clear, sterling depreciated sharply and, since the vote, UK inflation has dramatically increased. This column asks how much of the rise in inflation is due to the referendum. It finds that the referendum result pushed up UK inflation by 1.7 percentage points, which amounts to an annual (and potentially permanent) cost of £404 for the average British household.
The first detailed statistical analysis of how the referendum outcome has affected UK inflation, wages and living standards shows UK households are paying a high economic price for the vote to leave the European Union. The report – ‘The Brexit vote, inflation and UK living standards’, finds Brexit is costing the average household £7.74 per week through higher prices – which is equivalent to £404 a year. Higher inflation has also reduced the growth of real wages. The impact of price increases due to the referendum is equivalent to a £448 cut in annual pay for the average worker. In other words, the Brexit vote has cost the average worker almost one week’s wages.
PRINCETON – If we can prevent great suffering at no cost to ourselves, we ought to do so. That principle is widely accepted and difficult to dispute. Yet Western governments are neglecting an opportunity to reduce the great misery caused by mental illness, even though the net cost would be nil. The evidence for this claim comes from recent research by a team of economists at the London School of Economics. The team, directed by Richard Layard, drew on data from four major developed countries (Australia, Britain, Germany, and the United States) in which people were asked to indicate, on a 0-10 scale, how satisfied they were with their life. Associated Article: 'Origins of Happiness: Evidence and Policy Implications', Andrew Clark, Sarah Fleche, Richard Layard, Nattavudh Powdthavee and George Ward, Vox article published December 2016.
Both inequality and poverty are now on the rise again and predicted to increase
further in the next 5 to 15 years, but it has never been established if the two
are directly linked. Researchers
McKnight, Magali Duque and Mark Rucci explored the different types of
inequality including income inequality and concentration of wealth, over the
period 1961 to 2016.
Double Trouble, which was commissioned by Oxfam, shows that a positive
correlation between income inequality and income poverty in the UK can be
clearly established. Statistical analysis found that, on average, during the
last 50 years a one point increase in income inequality - as measured using the
Gini coefficient – was associated with an increase in relative poverty of 0.6
The report also examines the consequences of inequality, and in particular
points to evidence that it leads to lower overall economic growth as well as
negative consequences for some individuals and their families, and wider
society. Higher levels of inequality are shown to sustain higher levels of
poverty through a variety of mechanisms.
One of these is the growing polarisation between ‘the rich’ and ‘the
poor’. This affects people’s perception of
inequality, results in a lack of understanding about what it is like to live on
a low income, and this lack of empathy has important implications for support
for public policy designed to reduce inequality and tackle poverty.
The Government’s pledge to extend
the “Help to Buy” programme is a further mistaken investment in a policy which
has had little impact on extending home ownership to lower income households,
Bert Provan. So, the £2bn investment in “social and affordable
housing” is, while welcome, wholly inadequate to meet the pressing and
increasing need for low cost rented housing for households in most need.
LSE British Politics and Policy blog