Ed Miliband has taken another step towards ensuring the next government is judged by the success it has on raising living standards for working people.

He has written to Sir Andrew Dilnot, Chair of the UK Statistics Authority, asking him to consider a new Living Standards Index.

He suggests the index should be published on a quarterly basis by the Office for National Statistics and accorded equal status to current measures such as GDP.

The OBR would be expected to issue forecasts on the LSI in the same way as it does now for GDP so that the Government can be held to account on its record over family finances.

Ed Miliband MP, Leader of the Labour Party, said:

“The current government’s failure on living standards means working people have seen their wages fall by more than £1,600 a year since 2010 while full-time workers have seen their pay fall by over £2,000 a year.

“Indeed, this is set to be the first time since the 1920s that people are worse off at the end of the Parliament than they were at the beginning.

“This does not only cause hardship and pain for millions of families, it has also directly contributed to the Government’s failure to clear the deficit with stagnant wages leading directly to reduced tax revenues and higher welfare bills.  Income tax receipts have fallen short of their 2010 expectations by more than £68 billion and revenue from National Insurance Contributions by £27.3 billion.

“But the experience of everyday families too often does not make its way into the minds of policy makers because current measures are flawed:  the wage index ignores the growing number of self-employed; income data is a year out of date; and there is disagreement on which - out of a myriad of different indicators on prices - to use.

“And too often people look at the growth figures or hear the boasts from George Osborne and know these don’t reflect what is happening in their life.

“People are working harder and harder but getting nowhere; the feeling of dread that comes when bills come through the letterbox; the worry that money will not stretch to the end of the month.

“We measure so many aspects of  our economy but the one thing we don’t properly measure is the thing that matters most: the success of working people.

“It’s time we had a measure of the success of our economy which reflects the success of working people.

“That is I how judge the success of our country and how I will judge the success of my government.”

Ed Miliband’s letter to Sir Andrew Dilnot

Sir Andrew Dilnot

Chair

UK Statistics Authority
1 Drummond Gate
London
SW1V 2QQ

January 10,  2015

Dear Sir Andrew,

I am writing to ask you to consider  introducing a new measure of UK living standards.

As you know, there are a range of issues with the way that we currently measure living standards, which mean that the information available to policy makers is not giving a full and up-to-date picture of the living standards of families across the country.

Of particular concern is:

• Current measures of wages miss out on the earnings of the self-employed, who make up an increasing proportion of the labour force.
• As the review of consumer price indices by Paul Johnson that you published this week concluded that “there is an unhelpful proliferation of price indices in the UK at present” and no clear agreement on how best to measure the impact of prices at different levels of the income distribution. 
• Several of the existing measures of incomes are significantly lagged, with the most recent family resources survey showing data from 2012/13. Moreover, the measure of incomes published in the national accounts included the incomes of, for example, sports clubs and religious institutions.

Policy makers too often fail to understand and respond to changes in living standards and so we now need a better measure. My view is that key criteria used when developing this should include:

• Timely: a new indicator should be produced at least quarterly, based on data not older than six months. This should allow for discussion on the progress of living standards to reflect what people are actually experiencing.
• Comprehensive: a new indicator should reflect people’s real experience of the economy, including the impact of wages, prices and taxes and benefits on their incomes.
• Meaningful: a new indicator should show the experience of people across the range of the income distribution, and pick up how changes in wages or prices vary for those at the top, middle and bottom.

A future Labour government would use this indicator as the key measure by which we would expect our success to be measured, and I would ask the OBR to forecast this alongside measures of GDP.

We would be grateful if you could consider this issue, and the prospects for a new indicator, swiftly so that future governments can be fully held to account.

Yours sincerely

Ed Miliband