Winners and losers | 6 April 2011

The birds chirruping in the sunlight clearly didn’t get Ed Balls’s memo. Otherwise they’d know that today is “Black Wednesday,” the day when the coalition’s tax and benefit policies swoop in to leave the average household some £200 a year worse off. This is the message that the shadow chancellor is broadcasting this morning, be it on Radio 4 or in a post for Labour Uncut. His claim is that the coalition is — by going “too far, too fast” on the deficit — merely squeezing the “squeezed middle” even more.

Only that’s not quite the full picture. The Treasury, for one, is pointing out that today’s measures will actually leave 80 per cent of households better off. So who’s got it right? Stephanie Flanders explains the two competing viewpoints in a useful, clear post over at the BBC website, but the basic point is this: it depends on how you look at things. If you take every household in Britain as one big amorphous blob, then today’s changes will result in an average overall loss. But it you break those households down into ten income deciles, then eight of them —the bottom eight, as it happens — will be slightly better off after today. Of course, if you break it down further, then there will be winners and losers even within the different income deciles.

That said, it’s striking just how much more effective Ed Balls is when he talks living standards rather than Labour’s general fiscal prospectus. The Labour Uncut article could well be the punchiest thing that he has put his name to since ascending to the shadow chancellorship, not least because it actually bears some comparison to the truth. Fact is, the coalition’s taxes have noticeably raised the cost of living. The Office for National Statistics estimates that inflation would have been 1.77 percentage points lower over the past year — and back within target levels — were it not for the VAT hike and other measures. The effect will be lower over the coming year, though, at 0.29 percentage points.

The trick for the coalition is to convince that any pain has been made necessary by Labour’s profligacy, and will lead to gains in the end. And that, as Mike Smithson says over at Political Betting, is why the “blame game” is so important over this Parliament. So long as the tax hikes and spending cuts are regarded as a Brown Levy, then Balls’s pugnacious talk will never really connect — let alone draw real quantities of blood.