Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 360-379)

RT HON GORDON BROWN, MR JON CUNLIFFE, MR DAVE RAMSDEN, MR MARK NEALE, MS MRIDUL BRIVATI AND MR MICHAEL ELLAM

13 DECEMBER 2006

  Q360  Mr Newmark: You do not think it is or it is the case?

  Mr Brown: I think you will find that decisions in the Treasury are made by the Chancellor after taking advice from his officials.

  Q361  Mr Newmark: So you overruled them, okay. My next question is to do with living standards. I note that regular pay—

  Mr Brown: By the way, you can draw that conclusion from the—

  Q362  Mr Newmark: I can draw whatever conclusion I wish!

  Mr Brown: Well, that is true, you can draw whatever conclusion you wish, but other people cannot draw that conclusion.

  Q363  Mr Newmark: I note that regular pay rose at an annual rate of only 3.5% in the year to September. However, yesterday's inflation data put the RPI in the year to date at 3.9%. Does this not mean that average regular pay and, therefore, real take-home pay actually fell in real terms over the year?

  Mr Brown: I think you will find that the figures today that are published for average earnings are 4.1%.

  Q364  Mr Newmark: For what? I am talking about comparing the 3.5% versus the 3.9%.

  Mr Brown: Yes, but the figures for average earnings are 4.1%. The average earnings, including bonuses, are 4.1% and average earnings, excluding bonuses, are 3.8%.

  Q365  Mr Newmark: I am talking about average regular pay. Average regular pay is 3.5% in September versus 3.9%.

  Mr Brown: But I am giving you the latest figures and I thought you would be grateful to have them.

  Q366  Mr Newmark: Well, those are not the figures that we have here.

  Mr Brown: I know, but the figures have been published at 9.30 and I can tell you that the figures for average earnings are 4.1% and 3.8%.

  Q367  Mr Newmark: Are those figures including bonuses or excluding bonuses?

  Mr Brown: I just read them to you. I said that average earnings, including bonuses, are 4.1% and average earnings, excluding bonuses, are 3.8%.

  Q368  Mr Newmark: So average earnings, excluding bonuses, are 3.8?

  Mr Brown: Absolutely.

  Q369  Mr Newmark: But unfortunately the inflation index is 3.9%. Unfortunately, most people actually, other than your friends in the City, do not get bonuses, so actually in real terms once again living standards and real take-home pay are falling.

  Mr Brown: You have got to look at what is happening to the typical consumer budget in this country where the prices of items, like clothes and electronics, have fallen over the last few years. We have had a rise in interest rates which has meant that mortgages are rising—

  Q370  Mr Newmark: But, Chancellor, you just said that, excluding bonuses, it is 3.8%, whereas 3.9% is now the inflation rate.

  Mr Brown: Sorry, but the CPI inflation rate is, if I am right, 2.7%.

  Q371  Mr Newmark: Again you are moving statistics. It is the RPI.

  Mr Brown: Sorry, but the official inflation rate in this country is CPI and it is 2.7. The RPI is 3.9, RPIX is 3.4 and RPIY is 3.6.

  Q372  Mr Newmark: And 3.9 versus 3.8 is actually showing that real living standards and real take-home pay are falling.

  Mr Brown: I just do not accept that you take one index of inflation and—

  Q373  Mr Newmark: You are using one index, but I am using an RPI index. An RPI index is far more reflective of what is going on out there with ordinary people who do not get bonuses, so, as I say once again, real take-home pay for ordinary people not getting bonuses is falling.

  Mr Brown: I just do not accept this.

  Q374  Mr Newmark: Well, you do not have to accept it once again, but that is a fact for ordinary people.

  Mr Brown: I just do not accept this because you have got to look at household budgets as a whole and, when you look at the costs of clothing, when you look at the costs of electronics, when you look at the costs of other items in the household budget, and they will affect people differently, the one thing that is clear is—

  Q375  Mr Newmark: I am talking about for ordinary people out there giving you the latest stats which you have just said are 3.8 versus 3.9 which shows that real take-home pay is falling.

  Mr Brown: I am sorry, but the official inflation rate in this country is 2.7%.

  Q376  Mr Newmark: Once again you are changing the stats. I am using an RPI index.

  Mr Brown: There was all-party agreement when we changed the measure of inflation to bring it in line with all international standards and it is the CPI. Now, of course for benefits we do these things differently and of course I recognise, if you take housing costs and mortgages which are going up, that there is an issue for people, but, generally speaking, the costs of items, such as electronics, clothes and food, are such that it means that people are generally better off.

  Q377  Mr Newmark: I know, but I am using as a measure RPI, which you yourself also used, and it shows to me at least that real take-home pay, excluding bonuses, is falling. Anyway, let me move on to PFI—

  Mr Brown: Maybe I should just give you the figure that was in the Pre-Budget Report, that, in real terms, disposable income, that is after inflation, grew in 2006 by 2%, which is—

  Q378  Mr Newmark: I am not talking about the past. I am talking about where we are today, a snapshot today. A snapshot today shows that real take-home based on the latest figures is actually falling.

  Mr Brown: Well, can I just also give the Committee figures so that we do not confuse people. Disposable income, which is in real terms after taking account of inflation, grew by 2% in 2006 and the forecast is that it will grow by 2.25 to 2.75% in 2007.

  Q379  Mr Newmark: That is not what I am talking about, yesterday or tomorrow, I am talking about today. Anyway, let us move on to PFI.

  Mr Brown: Hold on, when I talk about 2006, it is actually the year we are living in and, when I talk about 2007, it is the year which is just ahead.


 
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