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Articles by Peter Levell
Small Area Consumption Estimates Combining Survey and Financial Footprints Data
1 Introduction Spatial inequalities are a key public concern in many countries. For example, surveys of public attitudes rank inequalities across areas as the most significant form of inequality in the UK: ahead of inequalities by income, race, gender or across generations (Benson et al. 2024). This means there is enormous policy interest in measuring and tracking these inequalities over time.
Using Understanding Society to study intergenerational wealth mobility in the UK
1 INTRODUCTION Why do wealthy parents have wealthy children? How much of the correlation between parents’ and their children's wealth is due to correlations in their human capital, and how much is due to other factors such as correlations in saving behaviour and asset returns, or any direct financial transfers parents make to their children? To answer these questions, researchers need panel data on the household wealth, earnings and other demographics of both parents and their children.
Cost of maintaining household support package rises by £14bn in light of new energy price cap -
Today’s announcement by Ofgem sees the energy price cap rise to 52p/kWh for electricity and to 15p/kWh for gas from 1st October until the next cap comes into effect on New Year’s Day. For a typical household this will mean a total energy bill of £1,080 for the three-month period spanning 1 October and 31 December. This compares to £590 had the current cap remained in place and £377 for the same period last year – a 187% increase.
The long squeeze: rising inflation and the current government support package -
The existing package of support Back in May, the government updated their one-off package of support for households, which now totals £24 billion and comprised five main strands: £400 to all households labelled as an “energy discount” that will be subtracted from energy bills. £150 for all households in council tax bands A-D (around 80% of households). £650 for any family on means-tested benefits. £300 for pensioners on means-tested benefits. £150 for those on a disability benefit.
Inflation for poorest households likely to increase even faster than for the richest, and could hit 14% in October -
In April 2022 Ofgem’s tariff cap increased by 54%, or nearly £700 per year for an average household. Yesterday the CEO of Ofgem said that Ofgem expect the default tariff cap to increase by another £800 in October, leading to a cap of £2,800 on average annual gas and electricity bills. This increase of £800 to the current cap means a 117% increase – more than doubling – of the tariff cap between October 2021 and October 2022.
Inflation hits 9% with poorest households facing even higher rates -
This morning the ONS announced that CPI inflation rose to 9% in the year to April, a level not seen since 1982, and significantly higher than the 7% rate in March. A key driver of inflation is the increased cost of energy; Ofgem’s updated energy tariff cap came into effect in April, raising the cap on average household bills on gas and electricity by 54% from the previous month, meaning a 70% year-on-year increase.
Changing views on trade’s impact on inequality in wealthy countries
The consensus view until the 2010s was that trade had little impact on inequality in high-income countries. This column reviews the recent evidence that challenges this view. Manufacturing employment contracted sharply in countries like the US and the UK which faced rapid net import growth from China.
The cost of living crunch -
Rising inflation affects all our living standards. Together with planned tax increases it means that average take-home pay is likely to fall over the coming year. It also raises specific issues for benefits policy. Those on low incomes will tend to find it hardest to tide themselves over during a period in which their real incomes are eroded, which by default is what happens when inflation increases sharply because the major benefits go up in line with a lagged measure of inflation.
Young and ethnic minority workers were hardest hit at the start of COVID, but not anymore
Younger workers were more likely than older workers to resume paid work in a new job or industry during the pandemic. The employment and hours of ethnic minorities recovered faster than the white ethnic majority. It is important that the government continues to pay close attention to the experiences of different groups in the labour market, writes an expert.
Young and ethnic minority workers were hardest hit at the start of COVID, but not anymore
Young workers have been quicker to adapt. Credit: Wayas Saeed/Unsplash, CC BY-SA 4.0 Governments had to take unprecedented measures to control the spread of the COVID pandemic, shutting down whole sectors and encouraging many people to work from home. The UK and other countries designed whole new systems of support for workers from scratch and deployed them in a matter of weeks.
The cost of living crisis – who is hit by recent price increases? -
This morning the ONS announced that CPI inflation rose to 4.2% in the year to October. This is much higher than the previous month’s figure of 3.1%, and is at a level not seen since December 2011. The Bank of England expects inflation to rise further still to 5% in the spring. When combined with the effects of recent tax changes (including the new social care levy and freeze in the personal allowance), price increases of this magnitude have significant implications for living standards.
Young and ethnic minority workers were hardest hit at the start of COVID, but not anymore
Governments had to take unprecedented measures to control the spread of the COVID pandemic, shutting down whole sectors and encouraging many people to work from home. The UK and other countries designed whole new systems of support for workers from scratch and deployed them in a matter of weeks. Economists advised governments in this task using real-time data, including from rapid online surveys, which helped to highlight which workers were worst hit in the initial lockdown.
A year of COVID: the evolution of labour market and financial inequalities through the crisis -
Publications Commentary Research People Events News Resources and Videos About IFS Publications Commentary Research People Events News Resources and Videos About IFS Home Publications A year of COVID: the evolution of labour market and financial inequalities through the crisis We use new, high-quality UK panel data to document the economic impacts of the COVID-19 pandemic at an individual level, from April 2020 to March 2021.
CIOT/IFS Online Debate: What is the role of tax in getting to net zero?
The UK is committed to reducing net greenhouse gas emissions that arise from UK-based activities to zero by 2050. The EU and other countries have set similar targets, and more will be encouraged to do so at COP26 in Glasgow in a few weeks time. Achieving these targets will require large shifts away from emissions-intensive activity from both consumers and producers. How far can tax and other carbon pricing mechanisms drive this behavioural change?
Tax policies to help achieve net zero carbon emissions -
The UK is legally committed to reducing the net greenhouse gas emissions that arise from UK-based activities to zero by 2050. Achieving that target will require large shifts away from emissions-intensive activity from both consumers and producers. The most striking feature of policy in this area is the sheer number of taxes, levies and subsidies that have been put in place to try to reduce greenhouse gas emissions.
Why do wealthy parents have wealthy children? -
Why do the children of wealthy parents accumulate more wealth than children from poorer backgrounds? Does parental wealth have a role in determining young people’s earnings, saving choices, returns to wealth and access to homeownership? How much wealth do parents give directly to their children? What other channels are involved in the persistence of wealth from one generation to the next?
Potential consequences of post-Brexit trade barriers for earnings
Potential consequences of post-Brexit trade barriers for earnings inequality in the UK Rachel Griffith, Peter Levell, Agnes Norris Keiller 01 December 2020 On 31 January 2020 the UK formally left the EU after over 40 years of membership. On 31 December, the UK’s transition period will come to an end and the UK and EU will establish a new trading relationship with greater trade frictions. At the time of writing, the terms of this relationship remain unclear.
MPCs through COVID: spending, saving and private transfers -
MPCs were directly elicited from a representative sample of UK adults in July 2020. Reported MPCs are low, around 11% on average. They are higher, but still modest, for individuals in households with high current needs. These low MPCs may be a consequence of the prevailing economic uncertainty. Some respondents report that they would respond to a one-time income payment by transferring more to friends and family, others report they would see a decline in the payments received.
A temporary VAT cut could help stimulate the economy, but only if timed correctly -
Reports indicate the government is considering a temporary cut in VAT to stimulate consumer demand, possibly targeted at sectors such as tourism and restaurants. A temporary VAT cut has the advantage that it is a ‘shovel-ready’ measure, which is easy to implement quickly.
Changes down the line: flattening the curve of public transport use -
Social distancing measures are likely to be with us for some time. Even as lockdown eases, and the economy reopens, there will be changes to both the way we work and the ways we get to work. This is particularly true for those who commute using public transport; if people using public transport must remain 2 metres apart, there will be far less capacity than in normal times.
Could coronavirus infect the Consumer Price Index? -
The spread of COVID-19 has led to sweeping changes in the way households work, spend their time and shop. This has led to large changes in spending patterns and, in some cases, rapid price changes. Web-scraped data collected by the Office for National Statistics (ONS) indicate that online prices of cough and cold medication shot up by 11% between the third and fourth weeks of March.
Household spending and coronavirus -
Many households are experiencing falls in their income as a result of the economic and health policy responses to the coronavirus crisis – often sharp falls. What they normally spend their money on will matter for how well they can weather this storm. If a household typically spends much of its budget on essential or inflexible items, it has less scope to adjust to a lower income by reducing spending without incurring relatively severe hardship.
The impact of COVID-19 on share prices in the UK -
The spread of COVID-19, and international measures to contain it, are having a major impact on economic activity in the UK. In this observation we describe how this impact has varied across industries using data on share prices of firms listed on the London Stock Exchange, and how well targeted government support for workers and companies is in light of this.
News Daily: Corbyn warned of resignations and Trump threatened over wall plan
If you want to get this briefing by email, sign-up here Image copyright PA More Labour MPs 'thinking hard' about future He's seven MPs down, following the resignation from the Labour Party of a group of parliamentarians unhappy with his leadership. But could Jeremy Corbyn be in for more bad news? At a Labour MPs' meeting described as "tense", Corbyn critic Ian Austin said he and others would have to "think hard" about their futures unless the party fixed what he called its anti-Semitism problem.
News Daily: Corbyn warned of resignations and Trump threatened over wall plan
If you want to get this briefing by email, sign-up here Image copyright PA More Labour MPs 'thinking hard' about future He's seven MPs down, following the resignation from the Labour Party of a group of parliamentarians unhappy with his leadership. But could Jeremy Corbyn be in for more bad news? At a Labour MPs' meeting described as "tense", Corbyn critic Ian Austin said he and others would have to "think hard" about their futures unless the party fixed what he called its anti-Semitism problem.
How Brexit hit the pound in your pocket
By Paul Johnson & Peter Levell Institute for Fiscal Studies Image copyright Getty Images The value of the pound has changed a lot over the past three years - making us all a little poorer. Back in December 2015, £1 would buy you about €1.40. Today it will get you nearer €1.14. It has suffered a similar fate against most major currencies, losing about 15% of its value over that time.
How Brexit hit the pound in your pocket
By Paul Johnson & Peter Levell Institute for Fiscal Studies Image copyright Getty Images The value of the pound has changed a lot over the past three years - making us all a little poorer. Back in December 2015, £1 would buy you about €1.40. Today it will get you nearer €1.14. It has suffered a similar fate against most major currencies, losing about 15% of its value over that time.
Aggregating labour supply elasticities
Economists disagree on the size of labour supply elasticities. The column uses a model of female labour supply to show that there is substantial heterogeneity in both cross section and over the business cycle. It is not possible to think about labour supply elasticity as a unique structural parameter. To understand the consequences of income tax changes, for example, we need to be explicit about whose tax is changing.
Men with fewer qualifications most at risk from potential new trade barriers with the EU -
Men with GCSE qualifications or below employed in certain manual occupations are more likely than other groups to work in industries at particular risk from new barriers to trade with the EU after Brexit. Historically, those in this group have struggled to find equally well-paid work elsewhere when job losses have occurred. That is one of the key conclusions from detailed new analysis of trade data carried out by researchers at IFS and funded by the ESRC’s UK in a Changing Europe initiative.
The exposure of different workers to potential trade barriers between the UK and the EU -
While there is no doubt that the UK’s vote to leave the European Union (‘Brexit’) in June 2016 will have far-reaching consequences, there is much we do not know about what these consequences are likely to be. We do not know what form of trade agreement the UK will strike with the EU, what new trade barriers may be imposed on UK–EU trade or what effects these will have on UK industries.
A 'Brexit Dividend' to spend on the NHS? -
Regardless of Brexit, the NHS will face increasing demand and cost pressures over the coming years. The Office for Budget Responsibility (OBR) recently projected that NHS spending would need to increase by 5.3% of national income over the next fifty years in order to meet increasing demand for its services and other cost pressures —a sum equivalent to about £110 billion in today’s money.
Little scope for post-Brexit tariff reductions to cut consumer prices significantly
Leaving the EU Customs Union would give us the opportunity to have an independent trade policy and to cut tariffs on imports. To understand the pros and cons associated with such a move, it is important to understand how large the benefits of such tariff reductions could plausibly be for UK consumers.
The Customs Union, tariff reductions and consumer prices -
Once again, a rancorous debate has flared over whether the UK should remain within ‘a’ or ‘the’ customs union with the EU following Brexit. Leaving the EU Customs Union would likely create additional costs for UK firms trading with the EU. However, it would also give the UK greater freedom to adjust tariffs on imported goods, and to strike new trade agreements with other countries.
Firms’ supply chains form an important part of UK-EU trade: what does this mean for future trade policy?
We often think of exports and imports as things made in one country and consumed in another – I export cars to you and import socks you’ve made. In fact, the majority of UK exports and imports are now made up of goods or services that are themselves inputs into production – I export engines to your car factory and import cotton to make into socks. This sort of trade is particularly important for understanding the UK’s trade with the EU.
How might Brexit affect food prices? -
Brexit has the potential to have a substantial impact on the prices households pay for food. Currently around 30% of the value of food purchased by households in the UK is imported, and the major source of food imports is the EU. In comparison, only 17% of overall consumer spending is on imported goods. This means that changes in the costs of imports – for example, through changes to tariffs or movements in exchange rates – are likely to have a particularly big impact on food prices.
The fall in sterling: who is hit by the rise in inflation?
This morning the Office for National Statistics announced that CPI inflation rose to 0.9% in the year to October, down from an inflation rate of 1.0% in the year to September but still substantially up from 0.6% in the year to August. The Bank of England expect inflation to rise further, to 2.4% in 2017 and 2.8% in 2018 – considerably higher than the 1.5% and 2.1% expected back in May.
More than nine in ten individuals pay more in taxes than they receive in social security over their lifetime
In a single year, 64% of individuals in the UK pay more in taxes than they receive in social security. But most individuals experience considerable change over their lifetimes: for example those not in paid work in one year are often in work in another year.
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