Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

The UK's six big money problems

The UK's six big money problems

Brexit dominates the headlines - but the UK economy faces many other important challenges.

Brexit continues to dominate the headlines - but the UK economy faces many other important challenges.

Inequality in the housing market, poverty among working people and reducing greenhouse gas emissions are among them.

For any party hoping to win power on 12 December, these are serious issues.


Fewer young people own homes

Only 36% of those born in the late 1980s have become homeowners by the age of 30, compared with 55% or more of those born between the 1940s and the 1970s.

Younger generations have seen the price of homes rise far more quickly than their salaries - the main reason for this change. This is particularly true in southern England.

Many more people in their 20s and 30s are now renting privately. Their average housing costs are about 20% higher than 20 years ago.

Meanwhile, low interest rates mean most owner-occupiers - many of them older people - enjoy lower housing costs than in the past.


Wages are £5,000 less than they might have been

Growth in productivity - the amount the UK's workers produce per hour worked - has been unprecedentedly poor since the 2008 financial crisis.

In the past 11 years, the amount workers produce every hour has grown by just 2.9%. That's about as much as it grew on average every 15 months in the preceding 40 years.

As a result, productivity in the UK is now 19% lower than it would have been had the trend seen before 2008 continued.

This really matters.

In the long-run, average living standards grow in line with growth in productivity.

Average hourly wages are roughly at the same level now as they were in 2008. Given they usually rise every year, this means they are also 19% below where they would have been had long-term trends continued.

A full-time worker on average hourly wages now earns £5,000 a year less than they would have done had the pre-2008 trend continued.


Poverty among people who are working

Low wages have had another knock-on effect - most people living in poverty in the UK are actually in working households.

In 2017-18, 58% of all those below the poverty line (less than £248 a week income for a couple with no children) were either in paid work or living in a household with someone who worked. This figure compares with 41% two decades ago.

In part, this reflects positive trends. There are fewer households where nobody works, and pensioner incomes have increased.

But it also reflects the fact for low-income workers, wages are not growing as fast as housing costs.


An ageing population

As the UK's ageing population grows, so does the amount of money the UK spends on pensions and healthcare.

In the past 30 years, spending on these areas has increased from 8.5% of national income to 13.1% - in other words, a rise of £100bn.

It's estimated this figure will have to increase by 1.7% of national income (£37bn in today's terms) over the next 10 years. This is just to keep pace with changes in the population and other cost pressures.

That will mean big tax rises, or spending cuts, just to keep things broadly as they are.


Problems with tax

The UK government currently takes nearly 35p in tax from every £1 earned - the highest share it's taken since the 1940s.

Given the ageing population, and the various spending promises being made by the main parties, this is unlikely to go down any time soon.

Having said that, many European countries raise more in taxes. But they tend to raise more from people on average incomes.

The UK, on the other hand, tends to rely on a small number of high earners for a lot of the tax it raises. The highest-income 1% of adults pay more than a third of all income tax.

The problem with this is that public finances are more vulnerable to changes in the income or behaviour of high earners. If a relatively small number leave the UK, this can have a outsized effect on taxes.

The amount of money raised is also under threat because tax levels on petrol and diesel have not been maintained. And it can be difficult to raise tax from multinational companies.


Going for zero

The main parties all say they want to reduce the UK's greenhouse gas emissions to net zero by 2050 at the latest.

While progress has been good so far (the UK's domestic emissions are 44% down on their 1990 level), the UK is still nowhere near meeting the target.

According to the Committee on Climate Change, radical changes are needed in the next few years. By 2025, it says, the UK should have a plan to completely replace gas as a source of domestic heating. By the early 2030s, all new cars and vans sold should be electric.

One of the economic challenges here is the less well-off spend more of their income on heating and transport costs. Any taxes targeting the carbon people produce need careful consideration to avoid making some worse off.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

Oil Prices Set to Surge After US Strikes Iran
0:00
0:00
Open
Oil Prices Set to Surge After US Strikes Iran
0:00
0:00
Close
Oil Prices Set to Surge After US Strikes Iran
BA and Singapore Airlines Cancel Dubai Flights Amid Middle East Tensions
Trump Faces Backlash from MAGA Base Over Iran Strikes
Meta Bets $14 B on Alexandr Wang to Drive AI Ambitions
FedEx Founder Fred Smith, ‘Heart and Soul’ of the Company, Dies at 80
Chinese Factories Shift Away from U.S. Amid Trump‑Era Tariffs
Pimco Seizes Opportunity in Japan’s Dislocated Bond Market
Labubu Doll Drives Pop Mart to Status as China’s Most Valuable Toy Maker
Global Coal Demand Defies Paris Accord Goals
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Telegram Founder: I Will Leave My Fortune to Over 100 of My Children
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Hungary Ranked Among the World’s Safest Travel Destinations for 2025
G7 Leaders Fail to Reach Consensus on Key Global Issues
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Shock Within Iran’s Leadership: Khamenei’s Failed Plan to Launch 1,000 Missiles Against Israel
Wreck of $17 Billion San José Galleon Identified Off Colombia After 300 Years
Man Convicted of Fraud After Booking Over 120 Free Flights Posing as Flight Attendant
Iran Launches Extensive Missile Attack on Israel Following Israeli Strikes on Nuclear Sites
Beata Thunberg Rebrands as Beata Ernman Amidst Sister's Activism Controversy
Hungarian Parliament Approves Citizenship Suspension Law
Prime Minister Orbán Criticizes EU's Ukraine Accession Plans
Hungarian Delicacies Introduced to Japanese Market
Hungary's Industrial Output Rises Amid Battery Sector Slump
President Sulyok Celebrates 15 Years of Hungarian Unity Efforts
Hungary's Szeleczki Shines at World Judo Championships
Visegrád Construction Trends Diverge as Hungary Lags
Hungary Hosts National Quantum Technology Workshop
Hungarian Animation Featured at Annecy Festival
Israel Issues Ultimatum to Iran Over Potential Retaliation and Nuclear Facilities
UK and EU Reach New Economic Agreement
Coinbase CEO Warns Bitcoin Could Supplant US Dollar Amid Mounting National Debt
Trump to Iran: Make a Deal — Sign or Die
Operation "Like a Lion": Israel Strikes Iran in Unprecedented Offensive
Israel Launches 'Operation Rising Lion' Targeting Iranian Nuclear and Military Sites
UK and EU Reach Agreement on Gibraltar's Schengen Integration
Israeli Finance Minister Imposes Banking Penalties on Palestinians
U.S. Inflation Rises to 2.4% in May Amid Trade Tensions
Trump's Policies Prompt Decline in Chinese Student Enrollment in U.S.
Global Oceans Near Record Temperatures as CO₂ Levels Climb
Trump Announces U.S.-China Trade Deal Covering Rare Earths
Smuggled U.S. Fuel Funds Mexican Cartels Amid Crackdown
Austrian School Shooting Leaves Nine Dead in Graz
Bezos's Lavish Venice Wedding Sparks Local Protests
Europe Prepares for Historic Lunar Rover Landing
Italian Parents Seek Therapy Amid Lengthy School Holidays
British Fishing Vessel Seized by France Fined €30,000
×