Have our troubles from the Seventies flared up again?
By Rosie Murray-West
12 May 2012
Forty years ago rising fuel bills, increasing food prices and a double-dip recession affected every family. Sound familiar?
The Queen's Jubilee, a double-dip recession and sky-high fuel prices - those with long memories might be tempted to think that history is repeating itself, with just the small matter of 40-odd years in between.
The BBC is getting in on the Seventies vibe, and has been running a series fronted by historian Dominic Sandbrook examining everything from strikes to home ownership to the rise of punk. This year's fashions, too, show a distinct nod towards the decade of platform shoes and hot pants.
Before you dig out your brazier and start hoarding candles, it is worth remembering that there are plenty of differences between that turbulent decade and the current economic problems. Petrol price rises, pay freezes and a dysfunctional economy are as much on our radar today, but thanks to rock-bottom interest rates and muted wage growth, the sensible responses are not always identical.
...However, Alan Steel, who began his career as a financial adviser in 1973 when, as he put it, "the whole world was coming to an end and you assumed that there was no getting out of it", said the experience had given him a valuable perspective on the current crisis. "This is not as bad as the Seventies," he said. "There are more consumers and more opportunities".
We might complain about the soaring cost of food, but compared with the Seventies the contents of our supermarket trolleys should be the least of our worries.
Today, inflation as measured by the consumer prices index (CPI) is 3.5pc. That is above the Government's target of 2pc, but inflation in the Seventies averaged 14pc. At the beginning of that decade a loaf of bread cost 8.8p - by the end, the same loaf cost 37p. Milk was similarly affected, with the cost of a pint moving from 4.7p to 17p, while sugar rose from 8.3p a kilo to 36p. The saving grace was that wage growth kept pace with the rising cost of living.
Today, wage growth is muted, but costs keep rising. Some of the greatest problems now, as in the Seventies, are the increasing costs of fuel, both for heating and lighting and for running our cars.
However, we have also become used to certain things just being cheaper. We spend less on clothes - increasing globalisation has made them far less expensive - while we also became accustomed to cheap food.
Mr Steel said one improvement was that we now had more disposable income for things such as "leisure services" because the percentage of our income spent on basic items had fallen. More people eat out, for example, and, as the graphic shows, a far greater proportion of the population can afford to run a car and have central heating.
The flip side is that Britain has become a more unequal society. Inflation hits the poorest harder, because they spend the greatest proportion of their income on basic subsistence items such as food and heating, which are increasing in price.
Fuel bills saw double-digit increases last year amid a fall in consumer spending. Deutsche Bank said that, as a result, energy bills would cause the biggest squeeze on household finances since the Seventies, when oil prices rose and Britain's economy stagnated. The bank is predicting that 4pc of all consumer spending will be taken up by heating and lighting homes by 2015.
...However, Mr Steel said high marginal tax rates meant the Seventies were not a decade for savers, either. "Today there is next to nothing for savers," he says, "but people should not have their money in cash for the long term anyway. The Seventies were not much fun for high earners."
...As for investment, Mr Steel said the best lesson from the Seventies was perspective. He pointed to the 18-year-long bull market starting in 1982, just a few years after we were "staring into the abyss". "We'll probably muddle through again," he said.
Quote courtesy of The Telegraph
12 May 2012