Comments: Labour's record under a cloud

Two linked points and one statistical one.
Firstly, the IFS figures based on the HBAI analysis show stong distibutional changes - so anyone in the top fifth of the income distribution (like many of your correspondents, and a proportion of your readers - likely larger than one-fith) would feel smaller growth than those lower down the income distribution.

Linked to this, strong regional factors - the South East and London has done worst while the North, Wales, Scotland have done best - feeding through to house price patterns.

So if your correspondents arepredominantly in the south and east of England, and in the upper end of the earnings distribution, they are likely to be a biased sample.

Statistical point - the HBAI figures on the self-employed are simply not believable - apparently about every child in poverty whose parents are not on benefit has a self-employed parent. The distributional figures are therefore hugely sensitive to the amount of fibbing done by the self-employed. National Accounts figures based on statutory tax returns are likely to be preferred as a source to voluntary survey returns for this reason. These show rising real personal disposable income up the scale (even if smaller at the top).

Posted by Paul Bivand at April 4, 2005 10:23 AM

Paul, if you read the original article of Feb. 27th you’ll see that it’s not just based on reader comments (always a self-selecting group) but on a national, monthly Mori poll of economic optimism. There’s a very good graph of the poll results here:

http://www.mori.com/polls/trends/economy.shtml

In the period since mid-1991 (50 quarters ago) the peak of the economic optimism index occurred in May 1997 at +28.

May 1997 was also a peak for the percentage of people that thought the economy would improve: 40%.

In Jan. 2005 those two figures were –19 and 12% respectively.

You will recognise May 1997 as the time of the last election. Economic optimism in the population at large was at a peak then but it has been going down ever since.

Things did not get better.

Posted by David Sandiford at April 4, 2005 12:20 PM

(Sorry, it was the last but one election).

Posted by David Sandiford at April 4, 2005 12:25 PM

There was something puzzling about the IFS figures, particularly since such a big hit to personal incomes would normally have had a much larger overall economic impact. Consumer spending and the housing market continued to rise quite strongly during 2003-4.

On the point about self-employment, without going into the details of the data, I think we have seen an element of "involuntary" self-employment - in a period of weak private sector employment, some people have been forced into self-employment by redundancy, generating much lower incomes than when they were employed. I'm not saying this accounts for what the IFS data showed about self-employment incomes but it is a point to consider.

Also, you may have seen that the HBAI analysis shows a two-year fall in incomes, before housing costs, for the bottom 10% of the income distribution. Finally, I thought the IFS numbers were a useful reminder that tax increases are not costless.

Posted by David Smith at April 5, 2005 02:17 PM

Just a quick point on the HBAI figures on income trends for the lowest 10%: year-to-year changes in this decile are apparently particularly uncertain, and the 3% drop from 2002/03 to 2003/04 isn't really statistically significant. If you look at three-year averages to remove some of the noise in the data, incomes for this group have been rising fairly steadily since the mid-1990s (although slower than every other income decile).

Posted by Jim at April 6, 2005 12:23 PM