Squeezed bottoms facing a perfect storm

Never mind the ‘Squeezed Middle’, it is the ‘Squeezed Bottoms’ (as the Leader of the Opposition is unlikely to describe them), who are going to suffer most over the next two years.

You know there is something up when even the boss of ASDA warns that a ‘perfect storm’ is hitting UK consumers. Squeezed on all sides, with prices up, incomes down, taxes up and jobs down, its not going to be a pleasant 2011 for those struggling to make ends meet…

The UK’s economic prospects in general are not looking good, with global food and oil prices sharply rising, and evidence from the Office of National Statistics that the UK economy was in even worse shape at the end of last year than original figures had estimated.

As Gavin Kelly, chief executive of the Resolution Foundation has shown, the typical working household is now poorer in real terms than it was a year ago.  In 2011, it will get poorer still. Even as growth resumes and the nadir of the financial crisis fades into memory, millions of families are living through a prolonged personal recession.

Over the past year, real wages fell by 5%.  According to government figures, this crunch is expected to continue until 2013, by which time, in real terms, the average low-to-middle-income family will be roughly £700 poorer per year than it was in 2009.

Add in increases in food prices – and the recent hike in oil prices (which will almost certainly feed through into higher petrol, energy and many other prices), and things start to look tricky for families struggling to make ends meet.

Add in the impact of the January VAT hike – and the impact of George Osborne’s £18 billion cuts to tax credits and benefits in April – which will result in the loss of another £1,000 a year for half a million families with a combined household income of less than £21,000.

Add in the predicted loss of a further 750,000 public sector jobs as the Government’s public spending cuts start to bite, and things start to look dire for millions who, if truth be told, never did that well out of the ‘boom years’ of the past decade.

Kath Carter, a pillar of the local community, and a key member of Church Action on Poverty’s local partner, Thrive – knows what it is like to struggle to make ends meet.  Shortly after the General Election, Kath wrote to share her concerns with the new Prime Minister:

“I was happy for you to gain your goals as a Christian woman, but sad that my son cannot find a job even though he is a full apprenticed engineer in the aerospace field. He lives on the dole in a house that he cannot afford to heat, in an area that used to have jobs galore in shipbuilding and the chemical industry. 1,400 steel jobs taken away at the stroke of a pen. It is easy to blame the benefit society – pride comes from working, but there aren’t any jobs for people to do. It is a continuous circle of training followed by a short-term job, then back to benefits.

I saw you on the TV driving in your big shiny cars from your warm comfortable houses in the best part of town. Funny, I didn’t see one deprived council estate in view. I used to live in your area, said hello to my neighbours but never crossed the threshold. Now on a council estate through being a failed businesswoman (I tried), I see my neighbours talking and visiting each other as communities do.

They may not have the trappings of wealth, but their spirit is strong despite the hardships they endure. These people are the people that made this country great.  Please, I ask you, take notice of the big divide and heed that God has not been introduced into government. All people are equal in God’s eyes, and so the government must look to God to see the way forward.”

Kath – and thousands like her – are already just keeping their heads above water and struggling to keep up with their debt repayments and living costs. They are not people in a position to see their incomes further reduced.

The one good piece of economic news last week was the £3.7 billion surplus in public finances in January – with higher tax revenues than most predicted. So when George Osborne gets up to deliver his Budget later in March, he now has an opportunity to make good the Coalition’s commitment to protect the poorest and most vulnerable from the impact of cuts.

So, George, for the sake of the squeezed bottoms of Britain, it is time do the right thing.

 

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