LWM’s proposal

We want to see the new West Midlands operation of the Office of National Statistics (ONS), begin adapting their statistics so that the Chancellor could ensure his inflation target can be properly applied across the UK and across a spectrum of households. A future Chancellor could have a set of targets like these:

Central England Inflation Targets

All households Households headed by a key worker Family households Pensioner

households

2 % 2 % 2 % 2 %
Inflation was
originally measured on the basis of ‘baskets’: formulae representative
of people’s spending patterns, our new ‘baskets’ would be researched
locally to reflect these different household types.

Success for
all this range of household types may need price control policies
reaching beyond just manipulating interest rates.

Would not these targets be very popular across such an English spectrum? This step would need a chancellor who wants to make his name by definitively going beyond the policy horizons of Mr Brown?

We conclude that any proper inflation indices for the West Midlands would suggest that the erosion of living standards in the UK is evident earlier in the West Midlands than in other English regions. See our alternative West Midlands living standards report on our blog.

Our lobbying

We are actively lobbying on these matters, and the most up-to-date developments can be found at our most recent alternative inflation report.

We have a comprehensive set of Powerpoint slides detailing the proposals, which can merely be outlined in a text of this length. Please contact LWM, at the address below, if you are interested in us talking you through this presentation.

From at least 2003, Gordon Brown was acknowledging that inflation in the UK differs from region to region. He has intermittently stressed the idea of having different regional pay settlements across the UK. It was he who first raised the issue of regional inflation indexes to foster such negotiations. Colleagues also working on this issue told the Treasury in 2003 that to go ahead with regional pay on the basis of hastily regionalised versions of the existing flawed inflation and prosperity indices would be to risk an ill-conceived scheme being inflicted on the already eroded standard of living of much of provincial England. (See web-bibliography).

Our international research

Our proposals have been informed by insight into how things might be done differently here in the UK,
formed from contact with the state statistical institutions in the USA, Germany and France.

All of these countries have measured inflation as it was experienced by more than just one type of household or part of society – they used more than one measuring formula/’basket’. All these G7 partner countries take housing costs into account in more than the nominal way used in the UK. House-price inflation not being part of targeted UK inflation is a major reason why housing-inflation has become endemic for us, unlike our G7 partners.

The USA and Germany have the most instructive experience of region-based baskets for tracking inflation that are in addition also based on specific parts of the social spectrum. The USA, for example, have since 1953 run indices based on ‘baskets’ specifically tailored to the spending of manual and clerical workers in dozens of different big cities like New York and Chicago, besides their even older indices for the whole spectrum of consumers in such cities. Since the 1940s the UK had been re-shaping its ‘basket’ to represent all classes and regions in one inflation figure! From our research we concluded that the USA along with post-war Germany have set the standard in containing inflation: a standard that the UK has consistently failed to match.

See our presentation…

LWM is seeking to develop this campaign for the adoption of our framework by regional and central government. Beyond the continuing lobbying mentioned above, we are keen to discuss this with both policy-makers and the public. So please do not hesitate to contact us if you are interested in either helping or just finding out more about these proposals or our other related localisation projects.

Andrew Lydon
LWM
May 2010

Early Day Motions in the House of Commons connected with our campaign:

See also parallel LWM work on Reform of the Bank of England

Links

Media coverage for this LWM project

Web-pages concerning relevant emerging government policy and enquiry submissions

Leave a Reply

Your email address will not be published. Required fields are marked *