JamesSmithRF

At our Resolution Foundation conference we now have @andyburnham.bsky.social setting out how policy needs to shift so that politics works for those in the poorer half of Britain. Agenda setting, some might say…

Great piece out this morning on the bleak prospects for living standards led by @louisemurphy.bsky.social 👏👏👏

Chart showing: Annual change in Real Household Disposable Income per household in various OBR forecasts

Families across Britain have experienced two decades of poor income growth, and the outlook for the rest of the 2020s isn't much better.

In fact, the OBR's projection for income growth for the rest of this decade is worse than any of its previous ones...

Unsung Britain • Resolution Foundation The 13 million working-age families across the poorer half of the country are widely courted by politicians. No party can win elections without their votes, and the country cannot succeed without thei...

Powerful and thought-provoking new report from @resolutionfoundation.org out today and well worth a read www.resolutionfoundation.org/publications...

We're now hearing from our brilliant first panel.

Tune into the livestream here to find out what they have to say ⤵️ buff.ly/TbXMmu8

The Unsung Britain conference is now hearing from Ashwin Prasad, the Chief Executive Officer of Tesco UK.

"My perspective as a major employer in this country is that far fewer people are in work than could be."

Chart showing working age families by employment status

Working isn't working. Our analysis confirms that work is not a guaranteed route out of poverty.

In the latest data, the majority (55 per cent) of non-pensioner families in poverty had someone in work. This is up from fewer than two-in-five families in the mid-1990s.

Ruth Curtice, Chief Executive of the Resolution Foundation, said: “The 13 million working-age families across the poorest half of the country are widely courted by politicians. But despite working harder they have seen their disposable incomes stagnate, as they grapple with shrinking pay rises, higher costs and a growing struggle with their health and care needs. “The stalling of disposable incomes means that many families’ hopes of home ownership have evaporated and work is not a guaranteed a route out of poverty. “If politicians want to regain the trust of the families of Unsung Britain, they need to get the economy growing again so that pay rises pick up, while also putting their specific needs at the heart of efforts to turn the country around. If they fail to do so, the economic malaise facing Unsung Britain risks fuelling further political disruption.”

🚨 Major NEW research published today 🚨

Our book Unsung Britain reveals that squeezed families now face waiting more than a lifetime for the doubling of living standards we used to enjoy every 40 years.

Full findings here 👉 buff.ly/7WcqrbQ

Unsung Britain • Resolution Foundation The 13 million working-age families across the poorer half of the country are widely courted by politicians. No party can win elections without their votes, and the country cannot succeed without thei...

Read the *book* here: www.resolutionfoundation.org/publications...

Particularly great work by @lalithatry.bsky.social, @mikebrewerecon.bsky.social and @tom-clark.bsky.social

At our ⁦‪Resolution Foundation‬⁩ conference we are talking about the poorer half of Britain. Great work from the RF team. For more see: www.resolutionfoundation.org/events/unsun...

Forks in the Curve: whether and how to respond to monetary policy divergence - speech by Megan Greene Given at the Resolution Foundation

Full text of Megan Greene's speech:

Discussion has focused on risks to UK monetary policy. @robwoodecon.bsky.social makes the point that any windfall from lower US rates spilling over to larger UK fiscal headroom is likely to spent given the unpopularity of the government.

Sorry to all those experiencing sounds problems with this event - we will post a recording of the event as soon as possible.

In his response @robwoodecon.bsky.social emphasises the importance of the risks from US tariffs, pressure on the Fed and how all this will play out for UK fiscal policy.

Megan Greene wraps up by assessing the risk to the monetary policy outlook. Upside risks from the labour market have diminished but the stickiness of UK inflation remains a concern, particularly given the momentum in wages.

Megan Greene makes the importance of global shocks clear - her analysis shows Fed policy and world shocks have as big an impact on UK inflation as domestic factors.

Megan shows us the importance of US and other global factors in driving the rise in UK government borrowing costs. Is clear that UK specific risk factors increased around the time of the LDI crisis in 2022.

Megan Greene gets us going by showing us that inflation and interest rates are becoming more globally driven.

Here @resolutionfoundation.org we’re hosting Megan Greene of the BoE’s Monetary Policy Committee. Topic for today: how economic conditions are diverging across US and Europe - plenty to talk about! Hearing from @robwoodecon.bsky.social and our very own @ruthcurtice.bsky.social too.

Overall, then, there's nothing in today's public finances data to make the Chancellor choke on her cornflakes in Davos. We get one more release before the Spring Statement, but there's nothing here at least to suggest that the statement will becomes an unwanted fiscal event.

It's tricky to unpick what is going on as we don't have monthly profiles from OBR's Nov fcast. But central gov receipts are ~£3bn lower than March profiles and spending ~£4bn higher. Local authorities continue to overspend. Again this looks broadly consistent with the OBR's high borrowing forecast.

So UK gov borrowing to December (£140.4bn) is above the OBR *November* forecast for borrowing in the whole of 2025-26 (£138bn), and way above its March forecast (£117.7bn). But we're now expecting a big surplus in January (as SA receipts come in) and smallish deficits after that.

Quick word on this morning's public finances data for the UK which were pretty much in line with expectations. Borrowing in December was £11.6bn, slightly lower than market expectations of £13.4bn. Year to date, borrowing is £140.4bn, which looks broadly consistent with the OBR's Nov forecast.

Finally, there shd be better news ahead. BoE is forecasting a large (0.5pp), broad-based fall in CPI in January (with further falls after). So extent of falls in goods and services inf towards more normal levels in Jan will be important. That shd reduce doubts at the BoE about further rate cuts.

The combination of falling wage growth and sticky inflation means that real wage growth is falling back. This is bad news for living standards and requires better growth performance for us to see sustained improvements here.

Services inflation is more important for the BoE as they are domestically driven. Chart on the left shows progress in the 12m rate has been slow and bumpy. But the good news is that higher freq inflation measures (right) look closer to levels consistent with 2% CPI inflation. This is encouraging!

You might expect goods-price inflation to be weak given global factors (goods which wd have gone to the US come to the UK because of higher tariffs). But here domestic factors, including NI and some regulation, mean price rises have been sticky. This *should* reverse later this year.

So where are we on the journey back to 2% inflation? This chart shows goods and services. You can see above target inflation in Dec reflects the fact that *both* are higher than normal (we've hit 2% on avg with goods at about 0.9% and services at 3.4%, they are now 2.2% and 4.5%).

This chart shows contributions to the 0.2pp increase in inflation between Nov and Dec. Biggest factor was tobacco duty which hit in Dec this year (was Nov last year) given the late Budget. But there were rises in (erratic) airfares, as well as a disappointing rise in food prices.

So here's the headline picture - UK inflation at 3.4% in December is the highest in the G7, and has been for 7 months now. A big chunk of why UK inflation is proving so sticky is down to govt policy in the form of higher administered prices and increases in National Insurance.