ICAEW chart of the week: England and Wales Census 2021

The ICAEW chart of the week looks at the results of last year’s census, illustrating how the population of southern and central England has grown much faster than in the north of England and in Wales over the past decade.

Bubble chart overlayed on a map of England & Wales scaled to population in each region with inner bubbles showing the increase in the last decade. 

North East 2.6m (+1.9%)
North West 7.4m (+5.2%)
Yorkshire 5.5m (+3.7%)

West Midlands 6.0m (+6.2%)
East Midlands 4.9m (+7.7%)
East of England 6.3m (+8.3%)

South West 5.7m (+7.8%)
South East 9.3m (+7.5%)
London 8.8m (+7.7%)

Wales 3.1m (+1.4%)

The Office for National Statistics (ONS) released the first results from Census 2021 in England and Wales on Tuesday 28 June, providing an initial snapshot of who we are and where we live across two of the four nations of the UK. It follows on from the initial release earlier this year of the Northern Ireland Census 2021, but we won’t see a full picture for the UK for some time as the 2022 census in Scotland was delayed until this year.

The chart highlights how the East of England was the fastest growing region in England, with its population growing by 8.3% to 6.3m between 2011 and 2021. This was followed by the South West (up 7.8% to 5.7m), London (up 7.7% to 8.8m), East Midlands (up 7.7% to 4.9m) and the South East (up 7.5% to 9.3m). The West Midlands grew less quickly (up 6.2% to 6.0m), but still by more than the North West (up 5.2% to 7.4m), Yorkshire (up 3.7% to 5.5m) and the North East (up 1.9% to 2.6m). The population of Wales only increased by 1.4% over 10 years to remain at 3.1m.

In total the population of England and Wales amounted to 59.6m in 2021. This was 6.3% higher than the 56.1m people living in the UK in 2011 and 14.6% higher than the 52.0m reported by the 2001 census. This reflects a slowing rate of growth in the last decade at 0.6% a year on average compared with the average rate of 0.8% seen between 2001 and 2011 and is substantially lower than the compound growth of 1.6% a year experienced over 120 years since the first official census in 1801 reported a population of 8.9m in England & Wales.

The ONS has published a breakdown of the population by age and sex by local authority, highlighting how the number of people has changed significantly in some parts of the country, such as Tower Hamlets (up 22% in 10 years), Dartford (up 20%), Barking and Dagenham (up 18%), Bedford (up 18%), Peterborough (up 17.5%), Central Bedfordshire and Tewkesbury (each up 16%) and Salford, Milton Keynes, Uttlesford, Vale of White Horse and Wokingham (each up by around 15%). The biggest falls were in Kensington and Chelsea (down 10%) and Westminster (down 7%), although there is some speculation that this was because of the pandemic as family and second homes elsewhere proved to be more attractive places to work from home during lockdown. This is unlikely to be the driver of decreases in some rural areas such as the 6% fall in Ceredigion in Wales or the 5% fall in Copeland in Cumbria, where long-term trends of population decline have continued.

The census has also confirmed how we are getting older on average, with a 20% increase in those aged 65 and over from 9.2m in 2011 to 11.1m in 2021. This continues to be a big driver for public finances, as more funding is needed to pay for pensions, health and social care at the expense of other public services.

There is still a lot of data crunching to do as the statisticians work through the more in-depth questions on the census, ranging from employment status, education and housing to ethnicity, religion, sexual orientation and gender identity among other characteristics – demographics in action and the likely source of future charts of the week.

This chart was originally published by ICAEW.

Economic storm clouds darken outlook for public finances

A slightly higher fiscal deficit for May and rising interest rates provide no comfort for the Chancellor as he considers how to respond to public sector wage demands.

The monthly public sector finances released on Thursday 23 June 2022 reported a provisional deficit for the month of May 2022 of £14.0bn, an improvement from this time last year, but still £8.5bn higher than May 2019, the year before the pandemic.

Public sector net debt increased by £21bn from £2,342bn at the end of March 2022 to £2,363bn or 95.8% of GDP at the end of May. This is £570bn higher than 31 March 2020, reflecting the huge sums borrowed over the course of the pandemic.

The deficit reported for the two months to May 2022 of £35.9bn was an improvement of £6.4bn from the deficit of £42.3bn reported for the months of April and May 2021, and £64.2bn better than the £100.1bn reported for April and May 2020. However, it was £19.8bn worse than the pre-pandemic deficit of £16.1bn for the two months to May 2019.

Tax and other receipts in the two months amounted to £147.5bn, £12.4bn or 9% higher than a year previously. This included higher income tax receipts from wage increases and bonuses as well as the new higher rate of national insurance, as well as higher VAT receipts driven by higher retail prices.

Expenditure excluding interest and investment for the year to date of £158.5bn was unchanged from the same period last year, as reduced spending on the pandemic including furlough programmes was offset by planned increases in spending announced in last year’s Spending Review and by additional support to households to help with their energy bills.

Interest amounted to £15.7bn in April and May, £6.1bn or 64% higher than the £9.6bn in the two months ended 31 May 2021, reflecting how higher interest rates and higher inflation are increasing the government’s cost of borrowing.

Net public sector investment in April and May 2022 was reported to be £9.2bn, which is £0.1bn lower than a year previously. This is slightly surprising given planned increases in capital expenditure as well as the subsidies given in the past two months to Bulb Energy, a failed energy supplier taken over by the government.

The increase in net debt of £21.2bn since the start of the financial year comprises the deficit for the month of £35.9bn less £14.7bn in net borrowing repayments. This reflects the recovery of loans to banks through the Bank of England’s Term Funding Scheme and of loans to businesses via the British Business Bank (including bounce-back and other coronavirus loans), offset by funding for student loans and other government cash requirements.

Alison Ring OBE FCA, Public Sector and Taxation Director for ICAEW, said: “A slightly higher deficit than expected in this month’s numbers and a rising interest bill will not provide any comfort for the Chancellor as he considers how to respond to public sector wage demands at the same time as attempting to build capacity for pre-election tax cuts next year.

The economic storm clouds hovering over the fiscal outlook, as living standards go into reverse and inflation erodes the extent of planned investment in local communities, are likely to make the government’s ambition to level up the country even more difficult to achieve.”

Table showing cumulative numbers for April and May 2022 and variances against the same period a year ago:

Receipts £147.5bn: £12.4bn or +8%
Expenditure (£158.5bn): £0.0bn
Interest (£15.7bn): (£6.1bn) or +39%
Net investment: (£9.2bn): £0.1bn or -1%
Deficit (£35.9bn): £6.4bn or -18%
Other borrowing: £14.7bn: £31.1bn or -212%
(Increase) in net debt: (£21.2bn): £37.5bn or -177%

Public sector net debt: £2,363.2bn: £170.1bn or +8%
Public sector net debt / GDP 95.8%: 0.5% or +0.5%

Caution is needed with respect to the numbers published by the ONS, which are expected to be repeatedly revised as estimates are refined and gaps in the underlying data are filled.

The ONS made several revisions to the prior period fiscal numbers to reflect revisions to estimates. These had the effect of increasing the reported fiscal deficit for the month of April 2022 by £3.3bn from £18.6bn to £21.9bn and decreasing the reported fiscal deficits for the 12 months to March 2022 by £0.9bn from £144.6bn to £143.7bn and for the year ended 31 March 2021 by £7.7bn from £317.3bn to £309.6bn.

Table showing receipts, expenditure, interest, net investment, deficit and net debt for April and May combined in 2019, 2020, 2021 and 2022 respectively.

For details, click on the link to the original article on the ICAEW website.

This article was originally published by ICAEW.

ICAEW chart of the week: Railway journeys

This week’s chart illustrates how railway strikes are not the only problem facing Great British Railways, the new publicly owned body being established to run the rail network from next April.

Column chart showing railway journeys in Great Britain by quarter from Q1 of 2018/19 to Q4 of 2021/22 split between season tickets; peak, anytime and advance; and off-peak and other. See text below for numbers.

The ICAEW chart of the week is on railway journeys in Great Britain over the past four financial years, highlighting how the number of trips on the network have fallen from a peak of 1,753m in 2018/19 to 1,739m in 2019/20 and 388m in 2020/21, before increasing to 990m in the most recent financial year ended 31 March 2022. These numbers exclude London Underground and light rail and tram systems in London and elsewhere, but they include London Overground.

Passenger numbers are well below pre-pandemic levels – a challenge with a government increasingly reluctant to plug the gap in passenger revenues with additional subsidies on an ongoing basis.

The biggest fall has been in trips using Season tickets, which at 51m during January through March 2022 were 70% below the 170m reported for the fourth quarter of 2018/19. Trips using Peak, Anytime and Advance tickets and Off-peak and other tickets in Q4 of 2021/22 were 22% and 15% down on the quarter ended 31 March 2019. The chart illustrates how travel patterns have changed as many more people work from home on a regular basis, especially regular commuters who have traditionally formed the backbone of rail passenger traffic.

These falls in usage – and in the associated revenue from ticket sales and other income – are likely to present a huge challenge for Great British Railways, the new public body scheduled to take over the running of the railways in England, Wales and Scotland from 1 April 2023 (not including Transport for London and light rail and tram systems). 

Great British Railways is taking on responsibility for the track and stations currently owned by Network Rail and for the running of train services too – with the train operating companies engaged to run services on its behalf under concession arrangements that expose the taxpayer to revenue risk. A difficult enough task at the best of times, but one made even more challenging by the consequences of the pandemic and with a shareholder in the form of a government keen to cut subsidies that have ballooned since the start of the pandemic.

As the chart shows, trips using Season tickets by quarter were 149m, 142m, 160m and 170m in 2018/19; 141m, 139m, 154m and 153m in 2019/20; 10m, 21m, 36m and 26m in 2020/21; and 32m, 36m, 48m and 51m in 2021/22. Trips using Peak, Anytime and Advance tickets were 127m, 128m, 132m and 130m in 2018/19; 133m, 140m, 141m and 119m in 2019/20; 11m, 46m, 46m and 27m in 2020/21; and 63m, 89m, 103m and 102m during 2021/22. Trips using Off-peak and other tickets were 152m, 163m, 157m and 143m in 2018/19; 163m, 169m, 166m and 121m in 2019/20; 14m, 67m, 57m and 27m in 2020/21; and 87m, 123m, 134m and 122m in 2021/22.

The recent strikes won’t help, especially if they recur over the summer. However, whatever happens, getting people back to using the railways is going to be a big task for the new team at Great British Railways – whether by persuading workers to return to the office, encouraging people out of their cars or by just enticing us all to let the train take the strain more often than we do at the moment.

This chart was originally published by ICAEW.

ICAEW chart of the week: Foreign travel

This week’s chart looks at the number of trips abroad by UK residents before, during and after the pandemic. Will travel chaos, the cost-of-living crisis and climate concerns prevent a full return to pre-pandemic levels?

Column chart showing foreign travel by UK residents to the European Union, USA & Canada, and Rest of the World by quarter from 2018 Q1 to 2021 Q4. For numbers see text below.

The Office for National Statistics (ONS) issued detailed statistics on travel to and from the UK on 15 June 2022 highlighting how both inbound tourism and outbound foreign travel fell dramatically over the course of the pandemic.

As our chart illustrates, there were 90.6m visits abroad by UK residents in 2018 (16.6m, 24.7m, 29.9m and 19.4m in Q1: Jan-Mar, Q2: Apr-Jun, Q3: Jul-Sep and Q4: Oct-Dec respectively) and 93.1m in 2019 (18.1m, 25.8m, 30.0m and 19.2m), before dropping to 23.8m in 2020 (13.9m, 0.9m, 6.2m and 2.8m) and partially recovering to 19.1m in 2021 (0.9m, 1.2m, 8.0m and 9.0m).

Most journeys were, as you might expect, to our nearest neighbours in the European Union (led by Spain, France, Italy, and Ireland), with the USA and Canada being major destinations too. Other popular destinations visited included Turkey, India, Switzerland, the UAE, China, Mexico, Australia, Thailand and ‘cruises’.

For 2018 through 2020, around 63% of foreign trips were for holidays, 25% were to visit friends or relatives, 10% were for business and 2% were for other reasons. Unusually, in 2021 just 47% of visits were for holidays and proportionately a much higher 43% were to see friends or relatives, with 7% being business trips and 3% for other reasons.

The recent chaotic scenes at airports and flight cancellations may be one reason not to travel internationally at the moment, but there are big questions about whether our travel habits will return to the levels seen before the pandemic even when those problems are resolved. The fall in the value of the pound makes overseas trips even more expensive just as families are feeling a big squeeze in their incomes as inflation accelerates upwards. Virtual meetings are making business trips less necessary than before, while many individuals want to cut back on flying in order to do their bit to contribute to achieving net zero.

Despite that, substantial growth is expected in 2022 and 2023 in the number of visits abroad from the low base of 2020 and 2021 as – for many of us – the lure of distant (and not so distant) shores will just be too great to resist.

This chart was originally published by ICAEW.

ICAEW chart of the week: Whole of Government Accounts 2019/20

We take a look at the government balance sheet at 31 March 2020 this week, following publication by HM Treasury of the long-delayed 2019/20 audited financial statements for the UK public sector.

Step chart showing public assets £2,129bn, liabilities of (£4,973bn) and net liabilities of (£2,834bn).

Fixed assets £1,353bn, receivables & other £195bn, investments £323bn, financial assets £268bn.

Financial liabilities (£2,207bn), payables (£201bn), pensions (£2,190bn).

Taxpayer equity (£2,834bn).

HM Treasury was up in front of the Public Accounts Committee (PAC) this week to be grilled on the Whole of Government Accounts (WGA) for the year ended 31 March 2020. The first question posed by MPs was why it had taken more than 26 months to publish the audited financial statements for the UK public sector, unlocking a tale of woe regarding the pandemic, delays in central government reporting, even greater delays in local government, and problems in implementing a new consolidation system. 

For all that, the PAC expressed their appreciation for the contents of the WGA, which comprises a performance report, governance statements, financial statements prepared in accordance with International Financial Reporting Standards, an audit report and a reconciliation to the fiscal numbers reported by the Office for National Statistics. The UK is one of the leading governments around the world in preparing comprehensive financial reports similar to those seen in the private sector, and is the only one to attempt to incorporate local government as well as central government and public corporations.

Our chart summarises the balance sheet reported in the consolidated financial statements at 31 March 2020, when there were total assets of £2,139bn, total liabilities of £4.973bn and negative taxpayer equity of £2,834bn. These numbers do not reflect the more than half a trillion pounds borrowed since then which are likely to see the 2020/21 and 2021/22 WGA move even further into negative territory. 

On the positive side of the balance sheet were:

  • £195bn of receivable and other assets, comprising £160bn of trade and other receivables due within one year, £22bn of receivables due in more than year, £11bn of inventories and £2bn of assets held for sale;
  • £1,353bn of fixed assets, consisting of £676bn for infrastructure, £459bn of land and buildings, £77bn of assets under construction, £41bn of military equipment, £60bn of other tangible fixed assets, and £40bn of intangibles;
  • £323bn of investments, including £126bn of non-current loans and deposits, £77bn in student loans, £36bn in equity investments, £22bn invested in the IMF, £38bn in derivatives and other, and £24bn in investment property; and 
  • £268bn of current financial assets, of which £118bn were in debt securities, £74bn in loan balances due within one year, £38bn in cash and cash equivalents, £13bn in gold holdings, £13bn in IMF special drawing rights and £12bn in derivatives and other.

On the negative side, there were:

  • £2,207bn in financial liabilities, comprising £1,266bn in government securities (gilts and Treasury bills), £560bn of deposits owed to banks, £179bn owed to investors in National Savings & Investments, £78bn in bank and other borrowings, £74bn in banknotes and £50bn in derivatives and other financial liabilities;
  • £201bn of payables, including £66bn of accruals and deferred income, £55bn of trade and other payables, £42bn in lease obligations, £34bn in tax and duty refunds payable and £4bn in contract liabilities;
  • £2,190bn in net pension obligations, of which £2,062bn were for unfunded pension schemes (NHS £760bn, teachers £490bn, civil service £309bn, armed forces £233bn, police & fire £197bn, other £73bn) and £128bn for funded schemes (local government £359bn less £253bn = £106bn, and other funded schemes £106bn less £84bn = £22bn). This balance does not include the state pension, which is treated as a welfare benefit and not a liability for accounting purposes; and
  • £375bn in provisions for liabilities and charges, including £157bn for nuclear decommissioning, £86bn for clinical negligence, £39bn for EU liabilities, £31bn for the pension protection fund and £62bn in other provisions.

Net liabilities therefore amounted to £2,834bn, reflecting the general policy decision taken by successive governments not to fund liabilities in advance, but instead to rely on future tax revenues and borrowing to provide cash as needed to settle liabilities and other financial obligations and commitments. As Sir Tom Scholar, Permanent Secretary at HM Treasury, informed the PAC, this minimises the investment risks the government might otherwise be exposed to if it were to invest in (say) the stock market.

Cat Little, Head of the Government Finance Function, set out plans to bring down the time to prepare the WGA, to within 24 months for the 2020/21 WGA and to within 20 months for the 2021/22 WGA. This remains a long way off the long-term objective of producing the WGA within nine months of the balance sheet date.

While the numbers in these financial statements are now more than two years old, they are still extremely valuable in providing a baseline for the financial position of the UK public sector as the country headed into the pandemic. It is well worth a read if you have the time.

The Whole of Government Accounts 2019/20 is available online.

This chart was originally published by ICAEW.

ICAEW chart of the week: Public finances by region 2020/21

The ICAEW chart this week highlights how every single region and nation in the UK was in deficit in the first fiscal year of the pandemic.

Our chart this week highlights how every single region and nation in the UK was in deficit in the first fiscal year of the pandemic.

The Office for National Statistics (ONS) recently released an analysis of government revenue and expenditure by region and nation of the UK for the financial year ended 31 March 2021 – the first year of the pandemic. 

This was a year that saw public spending balloon to £1,112bn from £884bn in 2019/20 as the government splurged cash in response to the arrival of the coronavirus. At the same time, taxes and other income fell to £794bn in 2020/21 from £829bn the year before, while unprecedented levels of support to businesses and individuals prevented a much greater collapse in tax receipts. The resulting deficit of £318bn was the largest ever in peacetime.

The chart illustrates how every region incurred a deficit in 2020/21, with a deficit per head of approximately £800 in Greater London (revenue per head £18,440/expenditure per head £19,240), followed by £1,640 in the South East (£14,020/£15,660), £3,360 in the East of England (£11,940/£15,300), £5,000 in the South West (£10,940/£15,940), £5,140 in the East Midlands (£9,860/£15,000), £5,920 in Yorkshire and The Humber (£9,620/£15,540), £6,220 in the West Midlands Region (£9,380/£15,600), £6,580 in Scotland (£11,780/£18,360), £6,780 in the North West (£9,800/£16,580), £7,960 in the North East (£8,700/£16,660), £8,180 in Wales (£9,060/£17,240) and £9,500 in Northern Ireland (£8,740/£18,240). These numbers compare with an overall UK average deficit of approximately £4,740 per person, comprising per capita revenue of £11,840 less per capita spending of £16,580 based on a population of 67.1m.

The deficit in 2020/21 was so large that even London and the South East, which normally supply substantially more revenue to the government than they receive back in expenditure, saw the reverse this time. (In contrast, for example, with the surpluses of £4,520 and £2,180 per head respectively in 2019/20.)

Inclusive of pandemic spending, most regions ended up benefiting from government expenditure and welfare support of between £15,000 and £17,000 per person in the year, the outliers being Scotland and Northern Ireland, where spending exceeded £18,000 and London where it exceeded £19,000 per head. There is much wider range in the average for taxes and other income, from less than £9,000 per person in in the North East and Northern Ireland (more than 25% lower than the UK-wide average) up to more than £14,000 per head in the South East and more than £18,000 per head in London (more than 50% higher than the UK average).

For the public finances 2020/21 was a landmark year, in which exceptional levels of expenditure and an extraordinarily large deficit led to a significant increase in public debt. Despite that – as our chart illustrates – there continue to be significant economic and fiscal disparities across the regions and nations of the UK.

This chart was originally published by ICAEW.

ICAEW chart of the week: Inflation around the world

This week we look at how inflation is racing upwards across the world, with the UK reporting in April one of the highest rates of increase among developed countries.

Bar chart showing inflation rates by G20 country: Russia 17.8%, Nigeria 16.8%, Poland 12.4%, Brazil 12.1%, Netherlands 9.6%, UK 9.0%, Spain 8.3%, USA 8.3%, India 7.8%, Mexico 7.7%, German 7.4%, Canada 6.8%, Italy 6.0%, South Africa 5.9%, France 4.8%, South Korea 4.8%, Indonesia 3.5%, Switzerland 2.5%, Japan 2.4%, Saudia Arabia 2.3%, China 2.1%.

Inflation has increased rapidly over the last year as the world has emerged from the pandemic. A recovery in demand combined with constraints in supply and transportation has driven prices, with myriad factors at play. These include the effects of lockdowns in China (the world’s largest supplier of goods), the devastation caused by the Russian invasion in Ukraine (a major food exporter to Europe, the Middle East and Africa), and the economic sanctions imposed on Russia (one of the world’s largest suppliers of oil and gas).

As the chart shows, the UK currently has – at 9% – the highest reported rate of consumer price inflation in the G7, as measured by the annual change in the consumer prices index (CPI) between April 2021 and April 2022. This compares with 8.3% in the USA, 7.4% in Germany, 6.8% in Canada, 6.0% in Italy, 4.8% in France and 2.4% in Japan. 

The UK’s relatively higher rate partly reflects the big jump in energy prices in April from the rise in the domestic energy price cap, which contrasts with France, for example, where domestic energy price rises have been much lower (thanks in part to state subsidies). The UK inflation rate also hasn’t been helped by falls in the value of sterling, making imported goods and food more expensive.

Other countries shown in the chart include Russia at 17.8%, Nigeria at 16.8%, Poland at 12.4%, Brazil at 12.1%, Netherlands at 9.6%, Spain at 8.3%, India at 7.8%, Mexico at 7.7%, South Africa 5.9%, South Korea at 4.8%, Indonesia at 3.5%, Switzerland at 2.5%, Saudi Arabia at 2.3% and China at 2.1%. For most countries, the rate of inflation is substantially higher than it has been for many years, reflecting just how major a change there has been in a global economy that had become accustomed to relatively stable prices in recent years. 

This is not the case for every country, and the chart excludes three hyperinflationary countries that already had problems with inflation even before the pandemic, led by Venezuela with an inflation rate of 222.3% in April, Turkey with a rate of 70%, and Argentina at 58%.

Policymakers have been alarmed at the prospect of an inflationary cycle as higher prices start to drive higher wages, which in turn will drive even higher prices. For central banks that has meant increasing interest rates to try and dampen demand, while finance ministries have been looking to see how they can protect households from the effect of rising prices, particular on energy, whether that be by intervention to constrain prices, through temporary tax cuts, or through direct or indirect financial support to struggling households.

Here in the UK, both the Bank of England and HM Treasury have been calling for restraint in wage settlements as they seek to head off a further ramp-up in inflation. They hope that inflation will start to moderate later in the year as price rises in the last six months start to drop out of the year-on-year comparison and supply constraints start to ease, for example as oil and gas production is ramped up in the USA, the Middle East and elsewhere to replace Russia as an energy supplier, and as China emerges from its lockdowns.

Despite that, prices are likely to rise further, especially in October when the energy price cap is expected to increase by 40%, following a 54% rise in April. This is likely to force many to make difficult choices as household budgets come under increasing strain.

After all, inflation is much more than the rate of change in an arbitrary index; it has an impact in the real world of diminishing spending power and in eroding the value of savings. 

This chart was originally published by ICAEW.

ICAEW chart of the week: Global population

The ICAEW chart of the week looks at how the estimated global population of almost 8bn people is distributed around the world.

Bubble chart showing estimated global population of 7,995m in 2022: South Asia 1,894m, East Asia 1,671m, South East Asia 682m, Pacific 43m, Africa 1,419, Europe 592m, Middle East 357m, Eurasia 246m, North America 511m, South America 443m and Central America & Caribbean 97m.

UN projections show that the planetary population will reach approximately 7,955m in June this year, a 1.0% increase over the 7,875m estimate for June 2021.

The largest region on our chart is South Asia, which has 1,894m inhabitants, including 1,411m in India, 216m in Pakistan, 173m in Bangladesh, 40m in Afghanistan and 31m in Nepal. This is followed in size by the 1,671m people living in East Asia, including 1,432m in mainland China (currently the most populous country in the world), 126m in Japan, 52m in South Korea and 26m in North Korea.

Africa is the third largest region with 1,419m inhabitants, with 482m living in Eastern Africa (including Ethiopia 118m, Tanzania 67m, Kenya 56m, Uganda 50m, Mozambique 34m and Madagascar 29m), 424m in Western Africa (including Nigeria 217m, Ghana 32m, Côte d’Ivoire 27m and Niger 26m), 254m in Northern Africa (including Egypt 106m, Sudan 46m, Algeria 45m and Morocco 38m), 190m in Middle Africa (including the Democratic Republic of the Congo 95m, Angola 35m and Cameroon 27m), and 69m in Southern Africa (of which 60m are in South Africa).

Excluding Russia and Belarus, Europe has 592m people, including 444m in the 27 countries of the EU (including Germany 83m, France 66m, Italy 59m, Spain 46m and Poland 38m), 68m in the UK and 43m in Ukraine, although these numbers are all before taking account of the several million Ukrainians who have been forced to flee the war and are living temporarily in other countries. 

Eurasia, comprising the Commonwealth of Independent States of Russia, Belarus and the ‘stans’ of central Asia, has 246m inhabitants (including Russia 143m and Uzbekistan 34m), while the Middle East has an estimated 357m people (including Turkey 85m, Iran 85m, Iraq 44m, Saudi Arabia 36m and Yemen 32m.

North America has 511m inhabitants (USA 336m, Mexico 137m, Canada 38m), while 97m live in Central America (52m) and the Caribbean (45m), and 443m live in South America (including Brazil 217m, Colombia 51m, Argentina 46m, Peru 34m and Venezuela 34m).

South East Asia has 682m inhabitants, including 277m in Indonesia, 113m in the Philippines, 100m in Vietnam, 70m in Thailand, 56m in Myanmar and 34m in Malaysia. A further 43m people live in the Pacific region, of which 26m are in Australia. 

Although the rate of global population growth was projected to slow significantly in recent years, from 1.3% a year in 2000 when the population was 6.1bn, to 1.0% a year currently and to a forecast of around 0.7% in 20 years’ time, that still means that the number of people on the planet is expected to grow to around 9.8bn in 2050, placing even greater demands on natural resources than today. 

This highlights just how important achieving net zero and environmental sustainability is to the lives and wellbeing of future generations.

ICAEW chart of the week: Real interest rates

The ICAEW chart of the week looks at how real interest rates – net of inflation – remain stubbornly negative despite recent increases in the Bank of England base rate.

Chart with three lines - nominal yields on government debt, the Bank of England base rate and real yields on government debt. See text for details.

A feature of the economy since the financial crisis has been negative real interest rates, with the Bank of England reporting a -2.33% implied spot yield on 10-year government gilts as of 30 April 2022. This compares with a base rate of 0.75% on that day (since raised to 1%) and a nominal yield of +1.9%. With further increases in interest rates likely as the Bank of England seeks to bring inflation under control it is possible that real interest rates will become less negative over the next few months, at least assuming inflation peaks and doesn’t accelerate out of control.

Negative real interest rates are generally considered to be stimulative to the economy, reflecting the monetary policy support that the Bank of England has been providing since the financial crisis almost a decade and a half ago. Economic theory suggests that this should encourage spending and investment, as the nominal interest earned on savings will not be sufficient to offset the erosion in the value of money as prices rise over time.

The chart highlights how real interest rates were -2.59% in January 2020, before falling to almost -3.08% in June 2020 and bouncing around between -2.50% and -3.00% until November 2021 when they fell to -3.33%. They have since increased to -2.33% in April and to -2.20% as of 10 May 2022. Over that same period, nominal interest rates similarly based on government bond yields have fallen from 0.53% in January 2020 to 0.13% in July 2020 before increasing to between 0.3% and 0.4% until January 2021 after which they bounced between 0.8% and 1.0% until December 2021 since when rates have gradually increased to 1.92% on 30 April 2022, falling slightly to 1.86% on 10 May 2022. During this time, the Bank of England base rate was reduced from 0.75% in January 2020, to 0.25% and then 0.10% in March 2020 where it stayed until increasing to 0.25% in December 2021, to 0.50% in February 2022 to 0.75% in March 2022 and to 1.00% in May 2022.

The yields used in the chart are only one way of measuring real and nominal interest rates, and it is important to note that the former depend on the inflation expectations of market participants at particular points in time, which are not the same as the actual rates of inflation that are or will be experienced.

The challenge for the Bank of England over the next few months in tackling the current surge in inflation is how to take away the economic stimulus theoretically provided by negative real interest rates without causing a collapse in asset prices and a potential recession. A series of tough calls for even the most hardened policy makers.

ICAEW chart of the week: Fuel prices

Our chart this week gives a breakdown of what makes up the cost of petrol and diesel, which continue to soar in price despite the temporary cut in fuel duty.

Column chart showing wholesale costs for 50 litres, distribution and retail costs, taxes and the fuel duty saving.

Petrol: £36.75, £4.30 and £40.40 = £81.45 (162.9p/litre x 50) after a fuel duty saving of £3.00.

Diesel: £44.20, £2.90 and £41.60 = £88.70 (177.4p/litre x 50) after a fuel duty saving of £3.00.

Source: RAC Foundation, 'Daily Fuel Prices 2022-05-03' x 50 litres.

A key component of the cost-of-living crisis is the expense incurred filling up our cars, which has risen by over 50% in two years from approximately 107p a litre for petrol and 112p a litre for diesel back in May 2020 to average prices of 162.9p and 177.4p per litre respectively on 3 May 2022.

Our chart illustrates how much this means in terms of a 50-litre fuel purchase. For petrol, this would have cost an average of £81.45 according to numbers supplied by the RAC Foundation, comprising £36.75 in wholesale costs, £4.30 in distribution and retail costs, and £40.40 in taxes. For diesel, the cost of buying 50 litres would have been £88.70, comprising £44.20 in wholesale fuel costs, £2.90 for distribution and the retailer, and £41.60 in taxes.

In each case, the Chancellor’s temporary 5p cut in fuel duty saves 6p per litre once VAT is taken into account, or £3.00 on a 50-litre purchase.

The wholesale costs of £36.75 and £44.20 (73.5p and 88.4p per litre) for petrol and diesel respectively are made up of £31.30 and £35.55 (62.6p and 71.1p per litre) for refined petrol and diesel and £5.45 and £8.65 (10.9p and 17.3p per litre) for bio content (principally ethanol) included in what you buy at the pump. Distribution and retail costs of £4.30 and £2.90 (8.7p and 5.8p per litre) for petrol and diesel respectively comprise delivery and distribution costs of £0.85 and £1.05 (1.7p and 2.1p per litre) and retailer margin of £3.45 and £1.85 (6.9p and 3.7p per litre). 

Taxes of £40.40 and £41.60 (80.7p and 83.2p per litre) comprise fuel duty of £26.45 (52.9p per litre) and £0.35 (0.7p per litre) in greenhouse gas and development fuel obligations for both petrol and diesel, and £13.60 for petrol and £14.80 for diesel (27.1p and 29.6p respectively) in VAT at 20%.

Most of the fuel duty cut has been absorbed by higher wholesale costs, meaning that prices at the pump are only just below their peak immediately prior to the Spring Statement on 23 March. However, retail fuel prices could well go up further in the coming weeks as higher crude oil prices flow through into the cost of refined petrol and diesel in response to EU sanctions against Russian oil.

Taxes on petrol and diesel remain a significant contributor to the public purse, with £26bn expected to be generated in fuel duty in the current fiscal year, despite a decade or so of freezing the rate and the recent temporary cut until March next year. The plan to phase out petrol and diesel vehicles poses a big dilemma for HM Treasury, which will need to make up for lost tax revenues once there is no hydrocarbon fuel to levy duties on. 

The current favourite option to fill the gap is road pricing, but the government has yet to formally announce a decision, something that will become more pressing as more and more drivers switch to electric cars.

This chart was originally published by ICAEW.