Will the decline in living standards be more potent than job losses for the Coalition?

Both the BBC’s Andrew Neil and City AM’s Editor Allister Heath this week have written about the squeeze on household budgets through a combination of, pay freezes and inflation that is already effecting people’s spending power ahead of the impact of the spending cuts and the VAT rise in January 2011, they claim its a ticking time bomb for the Coalition that has so far gone unnoticed.

On his blog this week Andrew Neil wrote ‘Figures I've seen suggest that living standards for those on average incomes are now in decline -- it is as if there's been a national pay cut thanks to very low wage growth and a very strong rise in taxes and prices (the highest in Western Europe) -- and that's before the rise in VAT to 20% in January. The squeeze on earning power is probably the toughest for almost 30 years.

The political fallout from that could be much worse than the cuts.’

While over at City AM in his Editorial on Friday Allister Heath wrote ‘There is a simple reason why retail sales are beginning to fall, and it has very little to do with the Comprehensive Spending review. A triple whammy of limited pay rises, elevated inflation and tax increases have conspired to impoverish most of the public over the past year, a development that has been barely picked up in Westminster and by the media. In those circumstances, it was always going to be the case that people would have less money to spend – hence why retail sales fell for the second month in a row in September, by 0.2 per cent.

Take pay rises. Total earnings are up just 1.7 per cent over the year; private sector workers have seen pay rises of just 1.2 per cent. Few companies can afford to be generous in this uncertain environment, characterised by a spike in input costs; fortunately, employees have been understanding and cooperative.'

Now it’s hard to imagine that job losses aren’t going to have a major effect on families, communities and local business especially if people can’t find alternative work, or that the media won’t pick up on the short, medium and long term damage that unemployment and workless households have on those families and communities affected, but both Andrew Neil and Alistair Heath make a valid point that the decline in living standards for those who have remained in work during this recession won’t go unnoticed.

And the reason its important politically as well as economically is because it’s the very same voters who are being effected now and will be in the future, who are most likely to have voted for the Coalition back in May and the Conservatives will need to be re elected on their own in May 2015.Any source