Category: ICAEW chart of the week

ICAEW chart of the week: Receipts and spending by age

My chart this week looks at how receipts and spending vary by age, a key driver for public finances that new Chancellor Kwasi Kwarteng will need to factor into his fiscal plans.

Column chart - showing receipts by age group per person per month above the line and spending below the line. 0-9: £150 (receipts) - £550 (public services and interest), £290, (pensions and welfare), £270 (health and social care), £380 (education) 10-19: £210 - £620, £320, £110, £750 20-29: £1,150 - £440, £120, £160, £110 30-39: £1,930 - £430, £150, £180, £30 40-49: £2,200 - £430, £170, £200, £20 50-59: £1,960 - £450, £190, £300, £10 60-69: £1,240 - £480, £340, £370, - 70-79: £800 - £640, £1,170, £600, - 80+: £600 - £730, £1,400 - £1,270 Average: £1,220 - £510, £365, £310, £155

Kwasi Kwarteng’s first Budget will be an emergency one, not only setting out his plans for the financial year commencing on 1 April 2023, but also re-opening the budget for the current financial year. It will be dominated by the emergency support package for individuals and businesses already announced, alongside starting to deliver on Prime Minister Liz Truss’s commitments to cut taxes and ‘shrink the state’.

The new Chancellor is likely to find that cutting public spending is not going to be easy given the increasing financial commitments made by successive governments since the Second World War on education, pensions, health and social care, the areas that now dominate public spending. He supported adding to those commitments only a couple of years ago when then Prime Minister Boris Johnson decided to expand eligibility for social care, and former Chancellor Rishi Sunak re-committed to the ‘triple-lock’ that guarantees increases in the state pension every year.

As our chart this week illustrates, receipts and spending vary significantly across age groups, with spending on education higher on the young, who pay very little in taxes, and spending on pensions, health and social care much higher for older generations who contribute less than the average, especially after reaching retirement age. This contrasts with the profile for those of working age who pay the most into the system while on average taking the least out.

Derived from an analysis from the Office for Budget Responsibility’s fiscal risks and sustainability report published in July, the chart shows how – before the emergency Budget scheduled for 21 September – budgeted tax and other receipts for the current financial year 2022/23 are equivalent to £1,220 per person per month, based on forecast receipts of £988bn and a population of 67.5m. This is below budgeted public spending of £1,340 per person per month (£1,087bn/67.5m people/12 months), with the deficit of £120 per person per month (£99bn in total) funded by borrowing.

Average receipts per person per month by age group are estimated to be in the order of £150, £210, £1,150, £1,930, £2,200, £1,960, £1,240, £800 respectively for those aged 0-9, 10-19, 20-29, 30-39, 40-49, 50-59, 60-69, 70-79 and 80+ respectively. These numbers include £115 per person per month of non-tax receipts spread evenly across everyone. 

Spending on public services and interest in the order of £510 per person per month, or £550, £620, £440, £430, £430, £450, £480, £640, £730 by age group, is less variable across age groups because it much of this spending is incurred on behalf of everyone, including £125 in interest, £73 on defence and security and £53 on policing, justice and safety for example.

Spending on pensions and welfare of £365 per person per month is less evenly spread, with £290 and £320 per month spent on those in their first two decades and £440, £430, £430 and £450 on those in their twenties, thirties, forties and fifties respectively. This increases to average spending per person per month of £480, £640 and £730 on those in their sixties, seventies and eighties or over. 

Health and social care spending of £310 is biased towards older generations, with per person per month spending of £270, £110, £160, £180 and £200 for the first five decades of life contrasting with the £300, £370, £600 and £1,270 spent on average on those in their fifties, sixties, seventies and eighties or over. 

As you would expect, education spending of £155 per person per month on average is mostly spent on the young, with around £380 per person per month spent on the under-10s, £750 spent on those between 10 and 19, £110 spent on those in their twenties, and £30, £20 and £10 respectively spent on those in their thirties, forties and fifties.

The reason this chart is so critical is because demographics are not in a steady state, with the ONS projecting that there will be an additional 3.3m pensioners in 20 years’ time, a 27% increase. This will have significant cost implications for this and future governments over a period when the working-age population – who pay most of the taxes to fund public spending – is projected to grow by just 4% in total. 

While a declining birth rate might relieve some of the pressure on education spending over the next 20 years, spending on the state pension, the NHS and on social care will grow significantly if the commitments made by the current and previous governments to provide for income in retirement, universal free health care and an increasing level of social care provision are to be met, at the same time as running public services to the standard required.

Kwasi Kwarteng’s predecessors have been able to cover the expanding share of public spending going on pensions and health and social care without raising taxes above 40% of the economy by cutting spending on public services, in particular the defence budget, which has declined from in the order of 10% of GDP to around 2% over the last half century. However, with defence already at the NATO minimum, and many public services under significant pressure to improve delivery, there is much less scope to find savings than there has been in the past.

This poses a very big challenge for the Chancellor as he puts together his medium-term fiscal plans. Economic growth needs to be much higher than it has been in recent years, not only to cover the cost of tax cuts that he hopes will generate that growth, but also to generate the extra tax receipts needed to fund pensions and health and social care as more people live longer lives.

This chart was originally published by ICAEW.

ICAEW chart of the week: before the emergency fiscal event

My chart this week looks at how the budgeted deficit was supposed to play out according to the Spring Statement back in March, ahead of an emergency fiscal event expected within the next few weeks.

Step chart: (£144bn) 2021/22 provisional deficit +£84bn COVID-19 measures not repeated +£18bn Economic growth net of inflation -£27bn Higher interest costs -£30bn Tax and spending changes = (£99bn) 2022/23 budgeted deficit

The new Chancellor will be looking at a range of possible large scale interventions to support individuals and businesses as they face unprecedented cost-of-living and cost-of-doing-business crises this winter. Several commentators have suggested that the combination of tax cuts trailed by new Prime Minister Liz Truss and a massive emergency support package could add more than £100bn to the deficit, more than doubling the budgeted deficit of £99bn established back in March 2022 just before the start of the financial year.

My chart illustrates how the deficit was expected to change from a provisional outturn of £144bn for the deficit in the year ended 31 March 2022, when taxes and other receipts were £914bn and total managed expenditure amounted to £1,058bn.

Last year’s totals included £84bn in COVID-19 related measures (£14bn of tax cuts and £70bn of spending measures) that are not repeated this year, with further spending this year – including continuing to treat COVID-19 patients and tackling NHS backlogs that stem from the pandemic – folded into departmental budgets set during the three-year Spending Review back in October 2021.

Economic growth net of inflation was expected to reduce the deficit by a further £18bn, comprising £21bn in extra receipts from forecast economic growth of 2.2% less £3bn (£41bn on spending, £38bn on receipts) from forecast inflation of 4.1%. The latter uses the GDP deflator measure for the ‘whole economy’ and was estimated at a point when consumer price inflation was expected to reach 8.0% this year.

Inflation also drove much of the jump in interest costs of £27bn in comparison with the previous year, principally because of interest accrued on inflation-linked gilts, but also as a consequence of higher interest rates.

Tax and spending changes amounted to £30bn, comprising £31bn in additional spending less a net £1bn in tax changes. The former comprises a £21bn or 2.0% increase in public spending principally stemming from the 2021 Spending Review, together with £10bn of support for household energy bills announced by former chancellor Rishi Sunak back in February and March 2022. Tax rises were expected to add £20bn to the top line, of which £18bn stems from the rise in national insurance rates from April pending the introduction of the health and social care levy next year. However, this was offset by £19bn in tax cuts and other movements, including a £6bn tax cut from increasing national insurance thresholds, £2bn from cutting fuel duty by 5p, and £1bn from freezing the business rates multiplier.

These changes result in a budgeted deficit of £99bn, being forecast tax and other receipts of £988bn less public spending of £1,087bn.

These amounts exclude £15bn in additional help for energy bills since the budget was finalised in March 2022, partially offset by £5bn from the windfall tax on energy companies announced at the same time. Adjusting for these two items, however, is relatively small beer compared with the large-scale fiscal announcements made by new Chancellor Kwasi Kwarteng. This is before the Office for Budget Responsibility works its magic in updating the fiscal forecasts for changes in the economic situation, taking account of higher inflation and interest rates, and lower economic growth or even an economic contraction.

The worsening economic outlook continues to overshadow the public finances, providing perhaps one of the worst foundations for any incoming Chancellor since the Second World War.

This chart was originally published by ICAEW.

ICAEW chart of the week: Energy price cap update

My weekly chart for ICAEW returns for a less than cheerful update on the energy price cap, highlighting how the massive 54% price rise back in April pales into insignificance in comparison with the recently announced 80% rise in October and the prospect of further big rises in the first half of 2023.

Column chart showing historical price caps for Q4 2020-Q1 2021, Q2-Q3 2021, Q4 2021-Q1 2022, Q2-Q3 2022, the recently announced price cap for Q4 2022, and industry forecasts for Q1, Q2, Q3 and Q4 2023. Average typical price cap: £1,042, £1,138, £1,277, £1,971, £3,549 (Q4 2022), £5,390, £6,620, £5,590, £5,890. Gas price/kWh: 3.0p, 3.3p, 4.1p, 7.4p, 14.8p (Q4 2022), 23.2p, 30.8p. 27.9p, £27.8p. Electricity price/kWh: 17.2p, 19.0p, 20.8p, 28.3p, 51.9pm (Q4 2022), 80.5p, 91.8p, 78.3p, 79.8p. Standing charge: £184, £188, £186, £265, £273 (Q4 2022), £275, £280, £280, £259. Sources: Ofgem, Cornwall Insights, ICAEW calculations. Average direct debit prices based on 'typical' annual household usage of 2,900 kWh of electricity and 12,000kWh of gas.

My chart this week is on Ofgem’s cap on domestic electricity and gas prices, which increased from an annual average of £1,042 back in October 2020 for a ‘typical’ household using 2,900kWh of electricity and 12,000kWh of gas paying by direct debit, to £1,138 in April 2021, £1,277 in October 2021 and £1,971 in April this year.

Unless the new prime minister intervenes, the energy price cap will rise to £3,549 on 1 October, significantly more than was anticipated in our chart back in January on this topic . Divided by 12, this gives a monthly average bill of £296 (compared with £164 currently and £106 last winter), although as energy usage in winter is higher for most households the £400 or £66 per month rebate between October 2022 and April 2023 announced by the government earlier this year will not go very far.

The change to quarterly price caps from 2023 onwards means that households face a further rise in January, making the winter even more expensive given that research from Cornwall Insight suggests energy prices will continue to rise, to a likely cap of in the region of £5,390 on 1 January 2023 and potentially to as much as £6,620 on 1 April 2023, before falling to £5,900 on 1 July and £5,890 on 1 October 2023.

The energy price cap is technically a series of regional caps on the price per kilowatt-hour (kWh) for electricity and gas, and on the daily standing charge payable by domestic users. Larger or less energy-efficient households using more electricity or gas will pay a lot more than the amounts shown here, while smaller and more energy-efficient households will pay less. There are higher prices for those using prepayment meters (£3,608 from 1 October) and those paying by cash or cheque (£3,764 from 1 October).

The chart illustrates how the average annual standing charge was £184 in Q4 2020 and Q1 2021, £188 in Q2 and Q3 2021, £186 in Q4 2021 and Q1 2022 and £265 in the current price cap, the large increase principally to cover the costs of dealing with the 40 or so energy suppliers that went bust over the past year. The average standing charge will increase to £273 in October and then is expected to stabilise at around that level, potentially at £275, £280, £280, and £250 respectively for the four quarters in 2023, although this depends on how Ofgem chooses to allocate the costs that make up the cap between fixed and variable elements in the pricing structure.

The average per kWh price for electricity has increased from 17.2p (Oct 2020-Mar 2021) to 19.0p (Apr-Sep 2021) to 20.8p (Oct 2021-Mar 2020) to 28.3p currently and will rise to 51.9p in October. If Cornwall Insight’s predictions come to fruition, the price is likely to rise to somewhere around 80.5p per kWh in January and potentially to 91.8p in April, before falling to 78.3p in July and rising slightly to 79.8p in October 2023. The potential peak of 91.8p is more than five times the level back in October 2020 and is likely to be an even higher multiple for the many households who were on fixed price deals that were often significantly below the level of the price cap.

The average per kWh price for gas has increased from 3.0p (Oct 2020-Mar 2021) to 3.3p (Apr-Sep 2021) to 4.1p (Oct 2021-Mar 2020) to 7.4p currently and will rise to 14.8p in October. The gas price is likely to rise to 23.2p per kWh in January and potentially to 30.8p in April, followed by 27.9p and 27.8p in the final two quarters of 2023. The possible peak of 30.8p would be more than 10 times the level of 3.0p back in October 2020.

The price cap about to come into force of £3,549 is based on annually equivalent wholesale energy costs of £2,491, network costs of £372, operating costs of £214, social and environmental contributions of £152, other costs of £88 and a profit margin of £63, before adding on £169 of VAT at a rate of 5%. These are equivalent to £208, £31, £18, £13, £7, £5, and £14 in a ‘typical’ bill of £296 per month.

The sheer scale of these price rises will make energy unaffordable for millions of families across the UK at the same time as many other prices are rising sharply. This will mean real hardship for those on low and middle incomes without significant additional financial support from government, whether in the form of extra rebates on energy price rises or support through the benefit system. Other options include reforming the pricing mechanism for electricity generated by non-gas sources such as renewables or providing the energy suppliers with a long-term borrowing facility to enable the expected price rises to be spread out over a number of years.

Either way, the incoming prime minister faces some very difficult choices in how to respond, not only to the cost-of-living crisis but also to an emerging cost-of-doing-business crisis that could see many businesses forced to close as their energy prices (not covered by the domestic price cap) become unsustainable.

In January, I said: “There may be trouble ahead.” Unfortunately for all of us, trouble has arrived.

This chart was originally published by ICAEW.

ICAEW chart of the week: Commonwealth Games

Our chart this week marks the start of the XXII Commonwealth Games in Birmingham, illustrating how the numbers of events and competitors have grown since the first games in 1930 to reach 280 events featuring 5,054 competitors in 2022.

Combined line and column chart showing medal events for each games (columns) and number of competitors (line). Games: I-III every four years from 1930 to 1938, IV-XII every four years from 1950 to 2022. Medal events I-X: 50, 68, 71, 88, 91, 94, 104, 110, 121, 121; XI-XX: 128, 142, 163, 204, 217, 213, 281, 245, 272, 261; XXI-XXII: 275, 280. Competitors: 400 in 1930 through to 5,054 in 2022.

The XXII Commonwealth Games in Birmingham, from 28 July to 8 August, involves a record 5,054 competitors from 72 teams participating in 280 events in 20 sports. This is many times the 400 or so competitors from 11 teams that competed in 59 events in six sports at the inaugural British Empire Games in Hamilton, Canada, in 1930.

Although much smaller than the Olympic Games, the Commonwealth Games is still a major undertaking with a budget for Birmingham 2022 approaching a billion pounds, including £778m of public funding, of which £594m is from central government and £184m is from Birmingham City Council, West Midlands city region and other local sources.

The main focus will be on sporting performance, with events in aquatics (12 diving, 52 swimming), athletics (58), badminton (6), 3×3 basketball (4), beach volleyball (2), boxing (16), cricket T20 (1), cycling (20 track, 4 road, 2 mountain biking), gymnastics (14 artistic, 6 rhythmic), hockey (2), judo (14), lawn bowls (11), netball (1), para powerlifting (4), rugby sevens (2), squash (5), table tennis (11), triathlon (5), weightlifting (16) and wrestling (12).

Birmingham 2022 is the first games to have more than 5,000 competitors, although with 280 medal events there is one less than the 281 that featured in Manchester 2002.

England, as the host nation, will be hoping to improve on its performance at the Gold Coast 2018 games, when it came second in the medal table with 136 medals (45 gold, 45 silver, 46 bronze) to Australia, who won 198 medals (80, 59, 59) on their home turf. India with 66 medals in 2018 (26, 20, 20), Canada with 82 (15, 40, 27), New Zealand with 46 (15, 16, 15), South Africa with 37 (13, 11, 13), Wales with 36 (10, 12, 14) and Scotland with 44 (9, 13, 22) will also be looking to do well.

For the participants, the efforts will be intense, while for spectators in the stadium and the audience at home, the nail-biting tension of the lawn bowls competition will be just one of many gripping sporting events to be enjoyed this summer.

This chart was originally published by ICAEW.

ICAEW chart of the week: hot weather

The chart this week is on the topic (or is that tropic?) of temperature, illustrating how hot weather has become hotter since the 1880s.

Column chart illustrating the maximum daily temperature by decade in ℃. 1880s: 29.3°C 1890s: 29.0°C 1900s: 31.2°C 1910s: 30.9°C 1920s: 31.0°C 1930s: 30.5°C 1940s: 31.5°C 1950s: 29.9°C 1960s: 29.6°C 1970s: 33.1°C 1980s: 29.9°C 1990s: 33.4°C 2000s: 33.0°C 2010s: 34.2°C 2020s: 37.3°C

Our chart this week is on hot weather, looking at how the maximum daily temperature in each decade has increased since the 1880s, according to the Met Office’s Hadley Centre Central England Temperature dataset. This is not from a single weather station, but averaged from several stations in order to be “representative of a roughly triangular area of the United Kingdom enclosed by Lancashire, London and Bristol”, according to the Met Office.

The Central England dataset reported a maximum temperature of 37.3% on 19 July, three degrees below the provisional highest temperature ever recorded in the UK of 40.3°C in Coningsby in Lincolnshire on the same day. However, as the chart illustrates, this was still substantially higher than the highest temperatures reported in each of the previous decades. 

Of course, the 2020s are far from over and there is a strong possibility that the peak in this decade will be even higher.

These were the maximum daily temperatures by decade in the Central England datasets:
1880s: 29.3°C (11 Aug 1884)
1890s: 29.0°C (18 Aug 1893)
1900s: 31.2°C (1 Sep 1906)
1910s: 30.9°C ( 9 Aug 1910)
1920s: 31.0°C (12 Jul 1923)
1930s: 30.5°C (27 Aug 1930)
1940s: 31.5°C (29 Jul 1948)
1950s: 29.9°C (6 Jun 1950)1
1960s: 29.6°C (29 Aug 1961)
1970s: 33.1°C (3 Jul 1976)
1980s: 29.9°C (28 Jul 1984)
1990s: 33.4°C (3 Aug 1990)
2000s: 33.0°C (19 Jul 2006)
2010s: 34.2°C (25 Jul 2019)
2020s: 37.3°C (19 Jul 2022)

This approach does not provide a full picture of climate change over the past 140 years, as we are just looking at the daily peaks of temperature in each decade. However, it does echo more scientifically-rigorous analysis of the climate that confirms that the planet is warming up, with even hotter temperatures expected in future decades if we don’t take action.

This chart was originally published on the ICAEW website.

ICAEW chart of the week: US dollar exchange rates

As the US dollar and euro approach parity, our chart illustrates how the US dollar has soared in value since the financial crisis compared with other major currencies apart from the Chinese yuan.

Step chart on US dollar exchange rates, showing the movements against sterling, the euro and the Chinese yuan between 9 Nov 2007 and 13 Jul 2022: Sterling: £0.48:$1.00 +75% = £0.84:$1.00 Euro: €0.68:$1.00 +45% = €0.99:$1.00 Yuan: ¥7.41:$1.00 -9% = ¥6.72:$1.00 Source: Bank of England.

Our chart this week is on the topic of exchange rates, illustrating how the US dollar has appreciated by 75% and 45% against sterling and the euro respectively since the financial crisis, only to decline by 9% against the Chinese yuan over the same period.

On 9 November 2007, one US dollar was worth 48p as the pound peaked in value at an exchange rate of US$2.095:£1.00 according to the Bank of England’s exchange rate database. Since then the dollar has appreciated and sterling has fallen to an exchange rate of US$1.195:£1.00 at 13 July 2022, making one dollar worth 84p or 75% more today. This movement reflects a combination of much stronger economic growth in the USA over the last 15 years, higher interest rates, weaknesses in the UK economy, and the position of the US dollar as the world’s reserve currency that makes it an attractive safe haven for investors generally and even more in times of economic turmoil.

The dollar has also appreciated against the euro for similar reasons, albeit by only 45% over the same period. On 9 November 2007, one dollar was worth 68 euro cents when the exchange rate was US$1.468:€1.00, compared with the 99 euro cents it was worth on 13 July 2022 when the exchange rate was US$1.005:€1.00 – having briefly touched parity during the course of that day.

For the poor British traveller this means going to the US is substantially more expensive than it was 15 years ago, with a pound now worth just under a dollar and two dimes, compared with almost two dollars and a dime back then, a whole 90 cents less. The cost of travelling to the EU is also more expensive, with the pound worth €1.18 now compared with €1.43 in 2007, a fall of 17% in relative purchasing power.

All three currencies have depreciated against the Chinese yuan over the same period, as the Chinese economy has continued to grow to become the second largest in the world after the USA. The relative strength of the US economy has restricted the depreciation in the dollar to 9% from being worth ¥7.41 to ¥6.72 over 15 years. This contrasts with a fall of 38% in the value of the euro against the yuan from ¥10.88:€1.00 to ¥6.79:€1.00 and a 48% depreciation in sterling against the yuan from ¥15.52:£1.00 to ¥8.03:£1.00.

Exchange rates are volatile and can move significantly over the course of each minute, hour, day, week, month and year, so the numbers will keep changing. They also don’t reflect the full picture, as inflation, interest rates and economic conditions mean that the value of the dollar, pound, euro or yuan in your pocket will be worth more or less depending on what you want to use it for.

The strengthening of the US dollar over the last 15 years is one of the key elements of the global economic story that has seen the US economy come through the financial crisis and the pandemic in better shape than almost every other developed country. Many commentators believe that this is likely to continue in the near term, especially as Europe is much more directly affected by the Russian invasion of Ukraine.

However, as all professional financial advisers will tell you, past performance is no guide to the future – and your guess about how much one US dollar might be worth in the next fifteen years is likely to be as good as anyone’s.

This chart was originally published by ICAEW.

ICAEW chart of the week: Long-term fiscal forecast

The chart this week highlights the difficult fiscal background facing an incoming prime minister as the OBR reports how a “riskier world and ageing population ultimately leave the public finances on unsustainable path”.

Column chart showing public sector net debt as a percentage of GDP from 2021/22 to 2071/22 per the OBR long-term forecast. Starts at 96% in 2021/22, declining to 68% in the mid-2030s and then rising up to 267% by 2071/72.

The publication of the Office for Budget Responsibility (OBR) of its combined fiscal risks and sustainability report on Thursday 7 July 2022 was overshadowed by events in Westminster, which is unfortunate given just how important the state of the public finances is to the success of future government administrations and to the country as a whole.

Setting out long-term fiscal forecasts for the next 50 years, the OBR has analysed threats posed by rising geopolitical tensions, higher energy prices, the pressures of an ageing population and the loss of motoring taxes, as well as risks such as cyber attacks, future economic shocks, higher defence spending, and global protectionism adversely affecting international trade.

The chart illustrates the baseline projections prepared by the OBR, which show public sector net debt as a share of GDP rising from 96% of GDP to 267% in 50 years’ time in 2071/72. This primarily reflects more people living longer with the consequent effect that has on public spending, in particular pensions, health and social care, combined with a declining proportion of working age adults who pay the most in taxes. The report also highlights the fiscal gap created by the loss of fuel duty and vehicle excise duty as petrol and diesel cars are replaced with electric vehicles.

The OBR’s Chair, Richard Hughes, commented how 20 years ago, “Government debt stood at 28% of GDP, the deficit was about 0.5% of GDP, the economy was growing at an average rate of 2.75%, and inflation was running at 1.3% – and the Treasury’s pioneering 50-year fiscal projections predicted that government debt this year, 2022, would stay just below 40% of GDP – consistent with the fiscal rules in place at the time.

“As we now know, debt this year is expected to be more than twice that, at 96% of GDP,” Hughes continued, highlighting how over the past two decades the UK economy has been buffeted by an unprecedented series of global shocks including a financial crisis, a pandemic, a major war on the European continent, and an energy crisis. 

Hughes commented: “Working away in the background as this series of crises unfolded were a set of longer-term pressures on the public finances and the number of people aged 65 and over rose by 3.5 million from 9.5 to 13 million people; we learned that global temperatures had already risen by 1°C and were on track to rise by 4°C by the end of this century; and having fallen from over 5% in 2002 to less than 0.5% in 2020, interest rates on government debt are now back up to 2%.”

One of the key drivers of the projection is the old-age dependency ratio, the number of those aged 65 and over to those aged 16 to 64, which is expected to rise from 0.31 in 2022 to 0.52 in 2072, with a low birth rate and inward migration insufficient to offset the increasing number of people living longer in retirement.

The report has stress tested the projections with a range of potential events that could make the financial position much worse, with different unpalatable scenarios seeing the ratio of debt to GDP rising to 288%, 304%, 317% or 437% in 2071/72, depending on the assumptions made. In the other direction, the OBR notes that 76,000 additional net inward migrants a year over 50 years would reduce the baseline projection for debt to GDP of 267% to 217% in 2071/72.

The next prime minister will inevitably focus on the many short-term challenges facing the government and the country, but the OBR report makes clear just how much a long-term fiscal strategy is needed to put the public finances onto a sustainable path.

This chart was originally published by ICAEW.

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.

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.