Published on 22 Mar 2011

‘Misery index’ hits two-decade high ahead of Budget

The sheep-like tendencies of Britain’s political commentariat seem to be throwing up a remarkable series of hagiographies about our “genius Chancellor”. Now I doubt George Osborne is one to get carried away with such hubris. Even if he was, today’s economic figures would have done much to puncture this bubble.

Inflation, on the Retail Price Index is at its highest level for twenty years. The target Consumer Price Index at 4.4 per cent is well over double the Bank of England’s target. It is driven by clothing, food, and transport, AKA punter misery. RPI at 5.5 per cent was last higher in June 1991. Clothing and footwear RPI (+12.7 per cent) is the highest since May 1980.

These figures are not just high, they have again exceeded expectations, and again ramped up expectations of a rise in Bank of England base rates within weeks.

I went a step further. The concept of the “Misery Index” is a simple economic concept that adds the ills of inflation and unemployment together into a single measure of our financial despondency. Today’s figures mean that in February 2011 it hit the highest level since Oct ’92 just after Britain was forced out of the ERM (and the then Chancellor was advised by a young Tory hotshot called David Cameron).

Reuters have done a brilliant interactive international comparison with slightly different data.

So there are other implications of such elevated levels of inflation. Moneyfacts reports that there are only eight savings accounts that now beat the rate of inflation. There are zero for higher rate taxpayers. There were 118, six months ago. Here is my film on savers and the Bank of England from last year.

Check out the Channel 4 News Cuts Map – and add a spending cut near you

The big picture here for me is that the numbers alone show that the recovery is far worse than being choppy: it is positively painful. The recession during the financial crisis was worse but not quite as painful. Inflation went up, but unemployment growth was contained. Today’s figures are just a flavour of the pain to come. Not all of it can be pinned on the Chancellor of course. Much is the delayed pain from the cushioned fall in living standards between 2008-2010. But as the Chancellor stands up to deliver his first full Budget speech, it should not be forgotten that the economy is still officially shrinking, inflation is at near two decade highs, unemployment is rising, and the Misery Index is back. The big story tomorrow at the Budget is not the “growth” initiatives/ announcements. It is the OBR’s assessment of the economy, and the pain even leaving out the cuts.

But the hagiographies of the “genius Chancellor” seem rather premature.

PS: You can follow me today and tomorrow on Budget day on Facebook: and at

4 reader comments

  1. Saltaire Sam says:

    Surely any connection between Osborne and genius must be ironic?

    This government’s race to cut fast and deep is already looking extremely unwise and we’ve hardly started to feel the pain yet.

    I return to my analogy of someone paying off a mortgage in two years instead of ten – it might clear their debt but in the meanwhile they starve and are not strong enough to enjoy being debt free.

    You also have to question just how bad the situation is when we can afford to get involved in another very expensive war while still paying out billions for the previous two.

    1. Philip says:

      “Genius George”, “Two Brains Willetts”…..the Tory press love their hyperbole for their own politicians, in the saem way as they fail to recognise even a smidgeon of worth in members of their opponents. Ours has become a society of exaggeration, over-simplification, short-termism and “factoids” replacing facts & evidence.

  2. Ray Turner says:

    Sold my Alfa Romeo today, mainly because it has become unaffordable on van-drivers wages, which is mainly due to the spiralling price of petrol but is certainly not helped by everything else going up whilst my wages are tightly pinned to the national minimum and as from 6th April this year I no longer qualify for Tax credits…!

    Misery index currently quite high in this household…!

    1. Y.S. says:

      With you taking mitigating factors regarding your car and the price of petrol stablising i do hope your Misery Index swings the other way.
      As for the Tax Credits I think the Benefit system should be for the least number of people in the country as possible, rather then half the country in it.
      People are doing part time work instead of full time. Not doing overtime. All because they are not any better off via the tax credit system.

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