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      What is happening with inflation in the US, and how worried should you be?

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      What is happening with inflation in the US, and how worried should you be?Why prices are rising, how long this might last, and why inflation is a psychological as well as an economic phenomenon Jobs are coming back, wages are rising, stock markets are hitting record highs. In many ways, the US economy is booming. And yet as we officially enter the holiday season, consumer confidence is at its lowest level in a decade. The reason? Inflation.The US inflation rate in October was the highest it has been since the early 90s, when Nirvana released Smells Like Teen Spirit and the Gulf war was just beginning.But should we really be worried? The Federal Reserve, and the Biden administration, think rising prices are “transitory” – caused by the hangover from the pandemic. Their critics are less sure.Inflation, especially during a global pandemic, is complicated. Here is what we know about inflation in the US.What is inflation?Inflation describes a general rise in the level of prices of all consumer goods and services. It is not specific to a particular good or service; rather it is a measure of when, broadly, things are more expensive than they were before.There are a handful of ways inflation is measured, though the Consumer Price Index (CPI) measured by the US Bureau of Labor Statistics is the most common system used to gauge inflation. The index looks at the prices of goods and services in cities and suburbs across the country, weighted depending on the proportion a good or service has in overall consumption. For example, food and housing is weighted more than clothing in the index.What’s happening with inflation?According to CPI numbers released in mid-November, prices in the US rose 6.2% in October compared with where prices were the same time last year. US core inflation, which does not include goods like energy and food whose supply is susceptible to external events, was 4.6% in October, its highest since 1991.Prices broadly increased in energy, housing, food, used and new vehicles and recreation. Price decreases for airline fares and alcoholic beverages were among the few price declines seen last month.The US is not the only country experiencing inflation – the UK, China and Germany have all also reported rising inflation in the last few weeks.The Fed has already taken steps to reduce inflation, ending some of its stimulus programs that saw it buying bonds to stimulate the economy. But the central bank has held off on its main tool to control inflation – adjusting interest rates – probably because doing so runs a higher risk of starting an economic recession.How worried should Americans be about inflation?Some economists have been pointing out that the inflation we are seeing now is just one piece of the pandemic’s impact on the economy, which overall has not been terrible.“There’s a lot of uncertainty. We don’t know what happens next. The past two years have been unprecedented and painful,” said Claudia Sahm, a senior fellow at the Jain Family Institute and a former Federal Reserve economist. “We’re going to have a bumpy ride.”Even though inflation was high in October, other figures like the strong increase in jobs and the surge in retail sales point to an overall good month for the US economy.“My baseline scenario is that as the pandemic is contained, which is happening as we get more vaccines out there, we will see inflation move back down to something that is very close to before Covid,” Sahm said. “I don’t think Covid has changed the underlying structure of the US economy.“I do take a lot of comfort that many people have the money to weather this storm, at least for now,” she said, citing the direct aid Americans got through stimulus checks and the child tax credit. “It really is upsetting to pay more for your groceries, but it’s really upsetting not to be able to walk home with the groceries in your cart.”Why is inflation happening?The pandemic has touched every inch of the US economy and has affected every American in some form, so there is no single reason inflation is happening.“When you look under the hood of the top-line numbers, there are a lot of stories,” Sahm said.The supply chain crisis has led to a shortage of cars, clogged shipping ports and overstuffed warehouses. Meanwhile, consumer demand has surged after plummeting in the early days of the pandemic.For example, a shortage of microchips has led to a slowdown in car manufacturing, which increased the sales – and ultimately prices – of used cars, Sahm said. Housing prices have gone up because renters feel comfortable moving again and rental owners feel comfortable charging higher rents.Some companies have not been hesitant to reap the benefits of increased consumer spending during the pandemic, raising prices and paying record compensation for the country’s top chief executives.Throughout the pandemic, the federal government boosted the economy through multiple trillion-dollar stimulus packages that gave money directly to families and employers, and the Federal Reserve policy lowered the interest rates and purchased bonds.What are the effects of inflation?The most obvious impact is that Americans are seeing higher prices whenever they go to the store, make investments in a house or car or pay their medical expenses. Some economists believe that the higher prices mean that some households will start slowing their spending as goods take up a larger portion of their budget.Inflation’s impact on people’s budgets will depend on whether wages can keep up with the rate of inflation. So far, it seems that wages are not keeping up with inflation, though industries that are recovering from severe pandemic losses, like hospitality, are seeing wage increases on pace with inflation.Inflation can also have a profound impact on politics as voters tend to blame the party in power for rising prices. So far, Republicans have been eager to blame Joe Biden for inflation, condemning him for overspending on government aid.“It’s a direct result of flooding the country with money,” the Senate minority leader, Mitch McConnell, told reporters in October.Democrats have taken the defensive, emphasizing that experts at the Federal Reserve believe the inflation will be short-lived and that pandemic assistance was necessary for the health and wellbeing of Americans during a crisis.“We are making progress on our recovery. Jobs are up, wages are up, home values are up, personal debt is down and unemployment is down,” Biden said the day October’s inflation numbers were released. “There is no question the economy continues to recover and is in much better shape today than it was a year ago.”How will it end?That’s the big question. Earlier this month the Fed chair, Jerome Powell, conceded that inflation had been “longer lasting than anticipated” and it was “very difficult to predict the persistence of supply constraints or their effects on inflation”. Economists expect the central bank to start raising rates next year in an attempt to tamp down price rises.But inflation is a psychological as well as an economic phenomenon. Fear of rising prices is already affecting consumers and could, perversely, lead to more price rises as consumers snap up goods fearing yet more rises in a market that is still constrained by supply chain problems.We will probably continue to be haunted by inflationary fears unless the price hikes do prove “transitory”. As the old economist joke goes: the best rate of inflation is the one no one notices.TopicsInflationEconomicsUS politicsnewsReuse this content More

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      in UK Politics

      Fund London’s trains properly if you want to boost British trade, government told

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      The government has been told to stop neglecting London’s trains if the UK wants to boost its status as a global trading hub. London’s transport network needs to be “properly funded” if the City is to boost the government’s global trade agenda, said Catherine McGuinness, chair of the City of London Cooperation. The city, as the country’s most important services’ hub, needs infrastructure that is “not in decline, managed or otherwise” she added, speaking at a trade conference organized by the Centre for Policy Studies at London’s Guildhall on Monday.Her remarks follow an interview with London’s transport commissioner, Andy Byfold, with the Observer on Sunday, in which he warned that unless fresh investment is agreed, the capital is “staring into the abyss”. “The negative route, the danger we face, is a managed decline, Mr Byfold said.Ms McGuinness also noted that much of the government’s rhetoric has focused on the quick wins from liberalising trade in goods by cutting tariffs with free trade deals. City leaders, including Ms McGuinness, called on the government to do more to boost trade in services, which is often poorly served by too great a focus on Free Trade Agreements. This approach, they say, does not reflect the UK’s economic strengths as a services-heavy economy. The sector accounts for around 80 per cent of GDP, and employs more than two million workers. Yet the UK’s most economically significant bilateral trade agreement, the EU-UK trade and cooperation agreement, provides relatively weak provisions for services. The impact of Brexit on services’ trade is not yet clear, in part as it is harder to measure than that in goods.Compared to goods’ focused deals, trade in services is often more challenging, Ms McGuinness said, because of regulatory barriers. It therefore demands intense “regulatory dialogue” including side routes like memorandums of understanding and regulatory forums. The remarks have particular significance post-Brexit, as the UK still lacks an effective regulatory forum with one of its biggest markets for financial services exports, the EU. A memorandum of understanding has yet to be formally agreed and signed between the two parties. Proposals made by Brussels also indicate that it plans to crack down on cross-border activity, including banks serving EU clients from London.Meanwhile, the UK should “be worried” about the future of the multilateral trading system, said Peter Mandelson, a former trade commissioner to the EU. “China has been adept at spotting and exploiting gaps” in the WTO rulebook, Mr Mandelson said. But it is not the only country to “play fast and loose” with the WTO’s rules. The system needs repair and improvement, he added.The comments came after the trade secretary, Anne-Marie Trevelyan, told City leaders that the UK must prepare for a shift in “global economic gravity” towards Asia.The trade secretary said: “The seven largest emerging economies are projected to surpass the economic size of the G7 during the 2030s.“Between 2019 and 2050, more than half of global growth is expected tom come from the Indo-Pacific,” she added. The UK has already started the process of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). And talks are also expected to begin “in the months ahead” with the Gulf Cooperation Council which includes Saudi Arabia. Trade talks with India are expected to begin early in 2022. More

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      in UK Politics

      UK’s most vulnerable face 18-month financial squeeze

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      The UK’s most vulnerable families and pensioners face an 18-month-long squeeze on incomes as benefits fail to keep pace with a surge in the cost of living, economists have warned. The speed of price growth is set to peak at close to 5 per cent in spring next year and remain high for the next two years according to the Bank of England and government spending watchdog, the Office for Budget Responsibility. It means people on benefits will have to wait for the lagging state pension and universal credit to catch up with surging inflation. As pressure grows on the chancellor to ease the burden, Baroness Altmann, Conservative peer and former pensions minister, said the pressure would be felt disproportionately by the less well-off.“I do worry that the lives of older people who don’t have huge wealth don’t seem to matter,” she told The Independent. “Policies have been introduced that seem to favour those older people who are already well-off and have taken money away from those who can least afford it.”She added that pensioners were especially exposed to inflation, as poorer retired people spend a greater share of their income on “basic essentials” which have shot up in price.This year, the 3.1 per cent increase in benefits planned for next spring is in line with the consumer price index’s (CPI) reading in September, despite the most recent data for October showing that inflation was at 4.2 per cent. This now is also the case for the state pension, after the government said it would break the so-called triple lock, which would have increased it by whichever was highest out of earnings, inflation or 2.5 per cent. Mr Sunak has been urged to use part of the saving made from cutting the £20-per-week universal credit uplift to address the energy-induced crisis in the cost of living. Mike Brewer, chief economist and deputy chief executive of the Resolution Foundation, said: “He could spend some of the money he saved from £20-per-week on energy-specific measures, whether that be the warm homes discount or cold weather payments.“We’re also in a for a year or several months of stagnating real wages too.”Guaranteeing the triple lock was a key Conservative manifesto pledge, but was put on hold in September for a year.Analysis by the Liberal Democrats suggests the move could leave pensioners £2.6bn poorer in real terms next year if the Bank of England’s forecasts for the rate of price growth prove correct, meaning that those on the basic state pension will be £208 a year worse off, while those on the new state pension will be £273 worse off.Households have already faced months of rising costs and near-stagnant benefits. The inflation-linked increase to universal credit and some other benefits was 0.5 per cent, far below the rate experienced by households in the 12 months to October.And a slowdown in wage growth throughout 2022 is expected to only be a growing problem for Rishi Sunak, according to the Resolution Foundation. Even in-work households who draw on benefits will feel a squeeze on their budgets through to next winter, as inflation eats through pay growth.Added to this sorry picture is rising energy bills, said Mr Brewer, with soaring gas prices being one of the biggest drivers in price growth in recent months. They are set to continue to push up households’ costs. The energy price cap, designed to limit the level at which energy providers can increase bills, could rise by as much as 30 per cent in April next year, according to analysts at research company Cornwall Insight.Labour’s shadow work and pensions secretary Jonathan Reynolds told The Independent: “This Conservative-made cost of living crisis is set to hammer those who can least afford it. “The government’s actions should be making life easier, not harder for people this winter, yet instead they have pressed ahead with universal credit cuts, tax hikes and a broken promise on the pensions triple lock. Labour would ease the burden by cutting VAT on energy bills to bring bills down immediately.”Jonathan Cribb, senior research economist at the Institute for Fiscal Studies told The Independent that the crisis will just “get harder if inflation climbs further”.Unexpected inflation spikes are particularly bad for those on fixed incomes, he added. The chancellor said in response to Wednesday’s inflation rise that many countries were experiencing higher inflation, and that the government was helping people to improve job prospects by allowing universal credit recipients to earn more money before losing some of their benefits. “We are also providing more immediate support, including through the £500m household support fund for the most vulnerable families, fuel and alcohol duty freezes, and the energy price cap,” Mr Sunak said. More

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      in World Politics

      UK trade talks risk ‘lending legitimacy’ to Brazil’s far-right regime, TUC claims

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      The UK risks lending legitimacy to Brazil’s far-right regime in its pursuit of closer trade ties with the country, trade union chief, Frances O’Grady has told the Independent. The warning comes as the UK launched a new export strategy Wednesday. The self-styled “ambitious” plan is aimed at encouraging exports to non-EU markets. It follows reports that show significant costs of new red tape for British traders doing business with the bloc, the UK’s single largest export market.Yet efforts to increase international opportunities for British businesses to compensate for greater trade friction with the EU must not come at the price of ethical standards, said Ms O’Grady, general secretary at the Trades Union Congress (TUC).“Ministers have rushed into trade deals with some of the worst regimes in the world for working people, like Colombia and Turkey. And now it looks like they will do the same with Brazil. “It’s vital our government does not legitimise the far-right Bolsonaro with trade talks on the global stage, especially in the year of an election,” she said, adding: “It’s time for ministers to do the right thing and make it clear that trade talks are off the table while Bolsonaro is still in power.” A new 50-page study from the TUC published Wednesday detailed a host of concerns with Brazil’s government, led by president Jair Bolsonaro. It notes that since the leader took power, four trade unionists have been murdered and strikes have been “violently repressed”.Meanwhile, British officials confirmed to the Independent that the country is currently listed among nations due to commence trade talks with the UK in 2022. The south American country is the eight largest economy in the world, according to the CIA’s World Factbook.The TUC’s report includes research on the numbers of murders within vulnerable groups who have clashed with the Bolsonaro regime. It details 29 murders of environmental activists in 2019, 129 murders of transgender people in 2020 between January and September as well as numerous “political” murders” the TUC said. “The government has published a list of journalists, activists, and social media influencers that it considers hostile to its agenda, and has encouraged its supporters to attack them online,” the report said. It added that trade union leaders face death threats and arbitrary arrest.According to a British government factsheet Brazil is the UK’s 33rd most important trade partner with bilateral trade worth around £5.6bn in the four quarters up to June 2021. While COVID-19 may have warped trade data, official figures suggest that the trade surplus the UK had with Brazil has shrunk over the same period. The UK sold £369m more in goods and services to Brazil than it bought from the country compared to a surplus of £948m in the four quarters to the end of June 2020.The debate over how to align the UK’s commercial interests with environmental and labour standards has become increasingly heated as it moves from securing deals that replicate EU trading terms, towards fresh agreements.“Trade deals can be a vehicle to improve workers’ rights and protections, while providing new jobs and investment for communities that need it most,” Ms O’Grady said. “But the UK government’s trade policy has not put working people first – whether home or away.”The TUC study also comes after environmental groups have also criticized and agreement to halt and reverse deforestation in Brazil and other nations at the UN COP26 climate summit in Glasgow this month. Environmental concerns have also been cited by EU member states who have refused to greenlight the EU’s trade deal with the Mercosur trade bloc of South American countries which includes Brazil.A Government spokesperson said: “We continue to engage with Brazil regularly on trade and we have been clear that more trade will not come at the expense of human rights or the environment.“The UK works to support human rights issues in the Amazon through a variety of mechanisms, including diplomatic channels and programmes to support communities and indigenous peoples.”They added: “We have engaged extensively with Brazil on COP26 and our climate commitments, including on deforestation. We have also worked to secure important net zero commitments from 11 Brazilian states, covering over 60% of Brazil’s emissions.”Environmental campaign group Greenpeace suggested that the lack of a binding timetable for the deforestation measures agreed at COP26 meant it had little value. Carolina Pasquali, executive director at Greenpeace Brazil, said: “There’s a very good reason [president] Jair Bolsonaro felt comfortable signing on to this new deal. It allows another decade of forest destruction and isn’t binding.”She added: “Meanwhile the Amazon is already on the brink and can’t survive years more deforestation. Indigenous peoples are calling for 80 per cent of the Amazon to be protected by 2025, and they’re right, that’s what’s needed. The climate and the natural world can’t afford this deal.” More

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      in UK Politics

      Up to 2.4 million more taxpayers in debt to HMRC since pandemic began, watchdog finds

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      Up to 2.4 million more British taxpayers have fallen into debt to HM Revenue and Customs (HMRC) since early months of the Covid pandemic, a spending watchdog has discovered.The UK’s tax debt burden ballooned from £16bn to £42bn between January 2020 and September 2021, a report by the National Audit Office (NAO) has found.The taxman paused most debt collection activity as Britain went into its first Covid lockdown in March 2020, with payments of VAT and self-assessment income tax also deferred for several months.The watchdog said HMRC faces “significant challenge” clearing the post-Covid backlog, warning that staffing levels are unlikely to be enough to manage the hugely-increased workload.As the UK emerges from the pandemic, tax officials will need to strike a balance between pursuing debt while continuing to give individuals and businesses time to recover their finances, the NAO added.The tax authority has forecast that it will have twice the usual level of debt to manage at the end of March 2022, with “several years” of higher-than-usual tax debts ahead.It predicts total tax debt will shrink to £33bn by March 2022, but this assumes the pandemic has not changed repayment behaviour, according to the NAO.It said that up to 2.4 million more UK taxpayers are in debt to HMRC when comparing September 2021 with January 2020.The average amount taxpayers owe has increased to £6,800. The tax authority has prioritised which debts to chase based on the likely impact of the pandemic on the ability to pay.The NAO suggested that HMRC should develop a revised strategy for recovering tax debt, which would consider the varying impacts of the pandemic on different taxpayers, and identify which are more able to pay and those most severely affected.Gareth Davies, the head of the NAO, said: “HMRC faces several years of managing a far greater level of tax debt than it has seen in recent times, as a result of the Covid-19 pandemic.“Some debtors have already been able to repay their tax debt quickly, but an unknown number of taxpayers have been badly affected and will struggle to do so. HMRC needs to significantly increase its capacity if it is to meet the changed scale and nature of the challenge.”Labour MP Dame Meg Hillier, chair of the Public Accounts Committee, said the HMRC now faces a “careful balancing act”, adding: “It must quickly recover the unpaid taxes from those that can afford it, yet support those who are struggling to pay.”A HMRC spokesperson said the body had offered extensive support for businesses and individuals during the pandemic through debt support schemes such as Time to Pay and VAT deferrals.“The debt balance is reducing as the economy recovers and we re-engage with customers to understand their circumstances and agree Time to Pay arrangements where appropriate – and we expect it to fall further,” the spokesperson said.“We have taken, and will continue to take, an understanding and supportive approach to dealing with those who have tax debts or are concerned about their ability to pay their tax.” More

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      in US Politics

      It’s not all about the culture war – Democrats helped shaft the working class | Robert Reich

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      OpinionUS politicsIt’s not all about the culture war – Democrats helped shaft the working classRobert ReichResults in Virginia and New Jersey do not make Republican dog-whistle politics the future. The left must do more to help Sun 7 Nov 2021 01.00 EDTLast modified on Sun 7 Nov 2021 01.03 EDTAfter Tuesday’s Democratic loss in the Virginia gubernatorial election and near-loss in New Jersey, I’m hearing a narrative about Democrats’ failure with white working-class voters that is fundamentally wrong.Is this a presidency-defining week for Biden? Politics Weekly Extra – podcastRead moreIn Thursday’s New York Times, David Leonhardt pointed out that the non-college voters who are abandoning the Democratic party “tend to be more religious, more outwardly patriotic and more culturally conservative than college graduates”. He then quotes a fellow Times columnist, the pollster Nate Cohn, who says “college graduates have instilled increasingly liberal cultural norms while gaining the power to nudge the Democratic party to the left. Partly as a result, large portions of the party’s traditional working-class base have defected to the Republicans”.Leonhardt adds that these defections have increased over the past decade and suggests Democratic candidates start listening to working-class voters’ concerns about “crime and political correctness”, their “mixed feelings about immigration and abortion laws”, and their beliefs “in God and in a strong America”.This narrative worries me in two ways. First, if “cultural” messages top economic ones, what’s to stop Democrats from playing the same cultural card Republicans have used for years to inflame the white working class: racism? Make no mistake: Glenn Youngkin focused his campaign in Virginia on critical race theory, which isn’t even taught in Virginia’s schools but comes out of the same disgraceful Republican dog-whistle tradition.The other problem with this “culture over economics” narrative is it overlooks the fact that after Ronald Reagan, the Democratic party turned its back on the working class.During the first terms of Bill Clinton and Barack Obama, Democrats controlled both houses of Congress. They scored some important victories, such as the Affordable Care Act and an expanded earned income tax credit.But both Clinton and Obama allowed the power of the working class to erode. Both ardently pushed for free trade agreements without providing the millions of blue-collar workers who thereby lost their jobs any means of getting new ones that paid at least as well.They stood by as corporations hammered trade unions, the backbone of the working class. Both refused to reform labor laws to impose meaningful penalties on companies that violated them or enable workers to form unions with simple up-or-down votes. Union membership sank from 22% of all workers when Clinton was elected to fewer than 11% today, denying the working class the bargaining leverage it needs to get a better deal.The Obama administration protected Wall Street from the consequences of its gambling addiction through a giant taxpayer-funded bailout but let millions of underwater homeowners drown.Both Clinton and Obama allowed antitrust to ossify – allowing major industries to become more concentrated and hence more economically and politically powerful.Finally, they turned their backs on campaign finance reform. In 2008, Obama was the first presidential nominee since Richard Nixon to reject public financing in his primary and general-election campaigns. He never followed up on his re-election campaign promise to pursue a constitutional amendment overturning Citizens United v FEC, the 2010 supreme court opinion that opened the floodgates to big money in politics.What happens when you combine freer trade, shrinking unions, Wall Street bailouts, growing corporate power and the abandonment of campaign finance reform? You shift political and economic power to the wealthy and you shaft the working class.Adjusted for inflation, American workers today are earning almost as little as they did 30 years ago, when the American economy was a third its present size.Biden’s agenda for working people – including lower prescription drug prices, paid family leave, stronger unions and free community college – has followed the same sad trajectory, due to the power of big money. Big Pharma has blocked prescription drug reform. A handful of Democratic senators backed by big money have refused to support paid family leave. Big money has killed labor law reform.Resilience: the one word progressives need in the face of Trump, Covid and more | Robert ReichRead moreDemocrats could win back the white working class by putting together a large coalition of the working class and poor, of whites, Blacks and Latinos, of everyone who has been shafted by the huge shift in wealth and power to the top. This would give Democrats the political clout to reallocate power in the economy – rather than merely enact palliatives that paper over the increasing concentration of power at the top.But to do this Democrats would have to end their financial dependence on big corporations, Wall Street and the wealthy. And they would have to reject the convenient story that American workers care more about cultural issues than about getting a better deal in an economy that’s been delivering them a worsening deal for decades.
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
      TopicsUS politicsOpinionDemocratsUS CongressVirginiaNew JerseyRaceUS domestic policycommentReuse this content More

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      in UK Politics

      Young left behind by Sunak’s Budget could become lost generation, economists warn

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      Children and young people face becoming a lost generation due to rising education inequality, high taxes and climbing house prices, leading economists have warned.Analysis shows that, despite spending touted in Rishi Sunak’s Budget on education and childcare, those in further education over the next three years will face funding that is still 10 per cent lower than it was in 2010.Tax hikes introduced by the chancellor will also disproportionately hit younger people as they target work over wealth. Cohorts entering the jobs market will also face stagnant pay packets, with wages which are 40 per cent lower than predicted before the financial crash of 2008. They face the highest tax burden as a percentage of GDP since 1950 by 2026, equivalent to £3,000 per household even as inflation may reach 5 per cent next year.Kate Green, the shadow education secretary, told The Independent: “The chancellor has got the wrong priorities and young people are paying the price for it.“This is a Budget that will leave millions of families on lower incomes worse off, fails to match the scale of the education recovery challenge with the funding the government’s own catch-up commissioner Sir Kevan Collins said was needed, and still leaves sixth forms and colleges with less funding than they had more than a decade ago,” she added.Weak pay growth comes as younger people also face higher property prices. According to the Office for National Statistics the average UK house price was £25,000 higher in August than a year earlier, at a time of low interest rates and after the government cut stamp duty – a move widely criticised for further inflating the market.Economists said Mr Sunak had chosen to back measures that would have less of an impact on elder generations rather than those that would hit all ages equally.“In the autumn 2021 Budget, it’s notable that extra public spending is concentrated on health and social care for older people,” said Lord Willetts, president of the Resolution Foundation’s Intergenerational Centre.“We do have an obligation to older generations, but we need to do more for younger people as well,” he added.Funding for sixth form colleges will still be 10 per cent lower in real terms than in 2009-10 by 2024, when accounting for inflation, even as evidence suggests starkly deepening educational gaps between children and young people from wealthier and poorer backgrounds.Overall, the total allocation for schools’ Covid recovery in the budget amounted to £4.9bn. This was less than a third of the total requested by former government education tsar Sir Kevan, who resigned his post in June over dissatisfaction with the catch-up funding offered by the Treasury.In response to the Budget, the education expert wrote in The Times, that it was a “surrender” in the effort to recover lost learning. “The short-term saving offered by a limited recovery programme will be dwarfed by the long-term cost of successive cohorts leaving education with lower skills, an effect that will be most apparent in our poorest communities,” Sir Kevan added. The Budget “represents a false economy and a step towards a less equal society”.Older students were particularly poorly catered for in the budget, according to the IFS.“Spending per student in further education and sixth form colleges will remain well below 2010 levels. This is not a set of priorities which looks consistent with a long-term growth strategy,” director Paul Johnson said.Younger people were also hit harder than elders with higher taxation, despite the new health and social care levy, which aims to raise £12bn per year to address the pressures of an ageing population.“Both NICS [the health and social care levy] and changes to the personal allowance and higher rate threshold will affect younger people who are working rather than pensioners who are out of work,” said Xiaowei Xu, a senior research economist at the IFS. “The chancellor could have chosen to raise something like council tax that would have linked to homeowners and therefore linked to pensioners as well,” she added.While there was a clear need to increase funding for the NHS and social care, the chancellor needed to reconsider how much support he was offering younger people, economists said.The announcement of the increases to national insurance contributions, which will become a health and social care levy, came several weeks ahead of the Budget. The major tax increase was criticised at the time as being a tax on the working age population, rather than those most likely to be using social care services for age-related needs.The Budget was also criticised for falling short on childcare provisions. It also offered an increase in benefits only to those universal credit recipients who can work, as opposed to those who may need to care for their children full time. Children in those households will be, in relative terms, worse off even after changes to the national living wage and the universal credit taper.Shadow chancellor Rachel Reeves described the Budget as “hammering working people, while giving banks a tax cut”.“The Tories have no plan to tackle the cost-of-living crisis, no plan to shift the unfair taxes they’ve hit working people with and no plan for growth,” she said.Low interest rates have also fuelled higher asset prices in recent years, making it harder for younger workers to get on the housing ladder. “We have a continued period of significantly negative real interest rates, probably therefore continued high levels of asset prices and very poor levels of earnings growth, all of which tends to favour those who are older and wealthier relative to those who are younger and less wealthy,” Mr Johnson said.A Treasury spokesperson, said: “This Budget means billions of pounds to deliver the priorities of the British people by investing in stronger public services, including our education system, levelling up opportunity, driving business growth and helping working families with the cost of living.“It makes work pay by cutting the universal credit taper rate from 63p to 55p, and raising the national living wage by 6.6 per cent to £9.50 an hour in April 2022, which the Low Pay Commission estimate will benefit 2 million workers. And we ensured our action to fund health and social care announced in September applied fairly across generations by extending the health and social care levy to apply to those working over state pension age.” More