SPERI British Political Research Economy Briefs

In this Brief, the Sheffield Political Economy Research Institute assesses evidence on trends within the UK housing market since the financial crisis. It concentrates in this regard on regional differences within the apparent housing market recovery, and considers what these differences indicate about the nature of the UK’s post-crisis growth model and the purpose of schemes such as ‘Help to Buy’. The Brief also assesses the regional impact of the coalition government’s recent changes to stamp duty on housing transactions – announced in December 2014 – and considers what this measure tells us about the government’s economic stewardship. It finds that regional housing inequalities have widened, and that the coalition government’s decision to significantly reduce stamp duty indicates that it is relatively unconcerned by this trend, and the economy’s dependence on the housing market more generally.

This brief considers the evolving basis of UKIP’s electoral support with reference in particular to whether more deprived communities are likely to support the party. The argument that the Green Party and Scottish National Party will take votes from Labour, whilst UKIP will grow at the Conservatives’ expense, is too simplistic. The evidence examined here challenges this notion in relation to UKIP’s support. The Brief demonstrates that prospective UKIP supporters typically reside in areas with high levels of deprivation, and that the party may pose as great a threat to Labour as it does to the Conservatives.

In this brief, the Sheffield Political Economy Research Institute shows that since the 2008 financial crisis, London has been relatively protected from public sector job losses compared to other regions in the UK. This means that whilst London and the South East have increased their share of public sector jobs from 23.7% to 25.1% of the UK total, the North of England has seen its share drop from 25.2% to 24.2%. Whilst one of the main justifications for austerity has been that the public sector ‘crowds out’ private sector employment, the brief shows that the region with the fastest private sector employment growth – London – has also seen the smallest reduction in its proportion of public sector employment. This suggests that public sector jobs can be complementary to rather than in conflict with the goal of building an equitable and sustainable economy for the UK.

In this Brief, the Sheffield Political Economy Research Institute (SPERI) responds to the coalition government’s 2014 Autumn Statement by considering the optimism and accuracy of the Office for Budget Responsibility’s income tax revenue forecasts, and related forecasts, since 2010. The Autumn Statement confirms the comprehensive failure of the coalition’s deficit reduction agenda, in part due to lower than expected tax revenue forecasts, but the consistent mismatch between economic forecasts and economic reality reveals a failure to acknowledge the profound changes in the UK economy which have accelerated since the financial crisis.

This brief shows that British society is becoming increasingly intolerant of unemployed people and other disadvantaged groups, with a growing sense that unemployment is caused by individuals’ personal failings, rather than by structural problems in the economy. The evidence presented in this brief is based on 90 interviews which were conducted in Leeds with participants from a variety of different social classes and ethnic backgrounds. The research also highlighted an alarming intolerance towards disabled people, with participants questioning the legitimacy of benefits for disabled people deemed incapable of working. We appear to be witnessing therefore the re-emergence of traditional distinctions between the ‘deserving’ and ‘undeserving’ poor, associated with the Victorian era. There is a danger that misplaced fears and prejudices relating to welfare claimants will present a threat to social cohesion, potentially legitimising policies which might exacerbate, rather than alleviate, social inequality.

In this brief, the Sheffield Political Economy Research Institute (SPERI) considers the relationship between population growth and economic growth in the UK. The fact that populations and economic output tend to grow in tandem, albeit at different rates, has been well-documented. However, the link between population growth and economic growth in the UK appears to have weakened. The implications of this shift are not clear. Certainly, productivity improvements are not driving the present recovery in economic output, and it may be that rapid population growth, in the context of the increasing dependence on labour-intense industries, offers the only viable path to growth for the UK under the present economic model. In advance of the Scottish independence referendum, the Brief also includes specific analysis of the relationship between population growth and economic growth in Scotland.

July 2014 - In this Brief the Sheffield Political Economy Research Institute (SPERI) considers the variable impact of local authority spending cuts across England, with reference to differences based on regional location, levels of deprivation and the political composition of councils. It also considers evidence on the cuts experienced by the specific councils affected by the 2014 English local elections, that is, those won by Labour, lost by the Conservatives, or where the UK Independence Party (UKIP) made significant gains. It shows there is a clear pattern to the cuts experienced by local authorities in England: councils in the North, in more deprived areas, and/or controlled by Labour have, generally speaking, been most affected by reductions in spending power at the local level. The extent to which the 2014 local elections were influenced by this differential impact is less clear, although some interesting trends are apparent.

January 2014 -In this brief the Sheffield Political Economy Research Institute (SPERI) considers what levels of pay across different sectors tells us about the experience of economic rebalancing since the financial crisis. In an economy rebalanced towards manufacturing, and away from financial services, we would expect to see the pay gap between these two sectors beginning to close. However, the gap has increased rather than decreased. Furthermore, pay in real estate activities is catching up to pay in manufacturing, further undermining the role of manufacturing in boosting exports and technological dispersion.

February 2014 - In this brief the Sheffield Political Economy Research Institute (SPERI) considers the relationship between the relative value of sterling and the UK trade balance. When a country’s currency depreciates in value relative to its major competitors, its exports become cheaper (and imports become more expensive); the depreciation of sterling experienced in the wake of the financial crisis should therefore have boosted policy-makers’ efforts to rebalance the economy towards exports and away from the domestic consumption of imported goods – as occurred following depreciation in the 1970s and early 1990s. However, there is no evidence of an improved trade balance following the recent depreciation of sterling, suggesting significant imbalances in the UK economy.

March 2014 - In this brief the Sheffield Political Economy Research Institute (SPERI) considers the differential regional impact in England of raising the income tax personal allowance – a measure announced by George Osborne at the Budget on 19th March 2014. The measure has been championed by both coalition partners as a form of support for the low paid workers. However,the extent to which individuals benefit depends on the extent of their income that is ‘taxable’, and the proximity of their income to other tax thresholds. The evidence presented in this brief shows that those who do not benefit at all – as a result of earning less than the current allowance – are more likely to live in Northern regions (particularly Yorkshire and the Humber) and the South-West. The measure therefore neither benefits the lowest paid, nor alleviates regional inequality.

April 2014 - This brief is focused on the impact of recent welfare reform in the UK on driving need for food bank provision. It is based on research conducted as part of a three-year study, funded by the Economic and Social Research Council (ESRC), into the growth of nationally co-ordinated or facilitated emergency food provision in the UK. This analysis is relevant to developing an understanding of the evolving boundaries of responsibility for welfare provision between state and civil society. The brief suggests that the All-Party Parliamentary Inquiry into hunger and food poverty should examine this issue closely, with a key emphasis on the fairness and adequacy of social protection. Welfare reform and the role it will leave for food banks should be examined by the Inquiry in terms of responsibility and be guided by the question of whose responsibility it is to protect people from hunger. The brief has been authored by Hannah Lambie-Mumford in the University of Sheffield’s Department of Geography. You can contact Hannah at hlambie-mumford@sheffield.ac.uk.

Taxation takes many different forms, encompassing progressive taxes such as income tax, regressive taxes such as Value Added Tax, and taxes targeted on private enterprises such as corporation tax. The economic downturn significantly affected tax revenues, and the Coalition Government since 2010 has sought to cut some taxes, to boost economic recovery, but at the same time raise others, in support of deficit reduction. It is important to consider, therefore, what impact these changes have had on the nature of the UK tax base as a whole. The evidence shows that regressive taxes now make up a higher proportion of tax revenues, and both progressive individual taxes and taxation targeted on private enterprises make up a lower proportion. Furthermore, revenue from business taxes is set to contract even further, even as economic growth returns, as proposed cuts are fully implemented.