"The so-called recession"
David Cameron is “unimpressed” with Lord Young’s talk of the “so-called recession.” However, there is much truth in what he says. For example:Claim: 100,000 job losses are within “the margin of error” in the context of the 30 million-strong job market.Fact: The ONS estimates that the sampling variability of its estimate of employment is 152,000 (p12 of this pdf). One-nil to Young.Claim: “Most people with a mortgage who were paying a lot of money each month, suddenly started paying very little each month. That could make three, four, five, six hundred pounds a month difference.”Fact: Since December 2007, the average standard variable mortgage rate has dropped from 7.68% to 3.93%. With the average mortgage just over £100,000 (11.1 million mortgages with total debt of £1.2 trillion) this implies a monthly saving of around £350. Some (those on fixed rates) will have benefited less, others (some tracker mortgages) more. Two-nil to Young.Claim: “For the vast majority of people in the country today they have never had it so good.”Fact: Only a minority of people have mortgages. Their gains, then, are offset by three groups of losers. First and most obviously, there are those who have lost their jobs; a net 876,000 full-time jobs have gone since the cyclical peak. Secondly, there are workers generally. Since December 2007, the average worker has suffered a cut in real wages: average earnings have risen 3.7% since then but the constant tax CPI has risen 7.6%. Within, this, though, millions would have done better. Thirdly, there are savers who have suffered lower interest income and higher prices.Net, then, I suspect Young is wrong here. So, I score it 2-1. By the low bar that is politicians’ standards in such things, this isn’t too bad. So why is he getting stick? Because he’s drawn attention to some inconvenient facts.1. We are not all in this together. The key fact about the recession is the variability of experience, from the big mortgagee who’s saved thousands at one extreme to the man who’s lost his job at the other.2. This variability is largely due to luck. The big borrower who’s saved thousands doesn’t deserve this good fortune. Nor do the savers who have lost out deserve their bad luck, nor the workers who have been sacked. This might seem trivially true, but it undermines rightists ideas that individuals are in control of their economic fate, that wealth is due to hard work and unemployment to workshyness. It also draws attention to the possibility that the pain of recessions might be mitigated by better institutions for pooling risk.So, if I were Cameron, I too would be unimpressed by Young’s remarks. There’s no place in politics for the truth.