Who are the Jams and will the Autumn Statement help them?

Posted on November 22, 2016

It is the latest acronym to come out of government: meet the Jams, or people who are “just about managing” to make ends meet. The government has pledged to help them in this week’s Autumn Statement. But who are they — and how will we know if they have been helped?

Who are the Jams?

In her first statement as prime minister, delivered on the steps of Downing Street, Theresa May said she would address directly people from “an ordinary working-class family” who “have a job but … don’t always have job security”, who “just about manage but … worry about the cost of living”. But she has not defined (at least, not in public) exactly who is in this group.

The Resolution Foundation has focused on one definition of “just managing” families: those in the bottom half of the income distribution table but above the bottom 10 per cent, who receive no more than one-fifth of their income from means-tested benefits. About 6m working-age households comprising 10m adults are in this position. Two-fifths of them have children.

Mrs May has not officially adopted this definition but Matthew Whittaker, chief economist at the Foundation, said: “From conversations we have had with people up and down Whitehall, they say ‘yes, that [the RF definition] fits the bill’.”

We already had the ‘squeezed middle’ and ‘hard-working families’ … 

These are, indeed, largely political labels. Tony Blair had “Mondeo Man” — the aspirational working-class voter who had backed Margaret Thatcher and John Major but who swung behind New Labour in 1997. “Worcester Woman” (single, two children, not very interested in politics) featured in the same campaign. Gordon Brown and George Osborne favoured “hard-working families”; Nick Clegg even appealed to bleary-eyed “alarm clock Britain”.

All these terms were deliberately vague but were meant to appeal to Middle Britain, allowing politicians to appear to speak to a wide range of voters without commentators being able to pin down exactly whether and how they helped them.

Only Ed Miliband, former Labour leader, was unlucky enough to be pinned down to define what he meant by the “squeezed middle”. In an interview with the BBC’s Today programme in 2010, he provided several different definitions. The broadest encompassed everyone except people on benefits and those on six-figure salaries: more than 42 million people, or nearly nine-tenths of the UK adult population.

Why is Theresa May targeting the Jams?

Mrs May is talking about a group who feel left behind by globalisation, a group who are thought to have voted disproportionately in favour of leaving the EU.

The gap between low to middle-income households and those at the top has actually narrowed since the start of the financial crisis. At that point earnings fell for everyone, including for the highest earners, but employment remained high, mitigating income losses at the bottom. Even taking into account the cuts made to benefits and tax credits by the previous government, incomes of poorer households grew more quickly in percentage terms than those of richer households between 2007 and 2015. But as Matthew Whittaker, chief economist of Resolution Foundation, said: “Any income drop is harder to take if you are living on the edge.”

However, problems for those on low and middle incomes began well before the financial crisis. Their earnings growth started to stagnate in 2002. It was only the Labour government’s rapid expansion of tax credits, which many of these families received, that caused their net incomes to keep rising, according to Mr Whittaker.

Am I Jam?

Policymakers and social scientists usually examine the UK’s income distribution in terms of net household income — that is, after paying taxes and receiving any benefits — adjusted to take account of the number of people living in a household. In other words, they take account of the fact that a single person living on £20,000 a year (for example) will be better off than a couple in receipt of the same income.

In the latest year for which data are available — 2014 — half of households in Britain lived on a net income of less than £24,600 a year for a childless couple. A single parent, with one child, working full-time and earning £8.10 an hour would have been exactly at the middle of the income distribution.

We do not know exactly where on the income distribution graph Mrs May would say the “Jams” group starts and where it ends, but it almost certainly excludes anyone near the top — say, a childless couple who took home more than £62,000 a year in 2014, and who would have been in the richest 5 per cent.

What is the outlook for the Jams?

Even if Philip Hammond, the chancellor, said nothing on Wednesday, there are policies already in the pipeline that will hit the incomes of many “just managing” families. The Brexit vote is also expected to lead to lower economic growth and higher inflation, which will weigh on the incomes of Jam families.

George Osborne, Mr Hammond’s predecessor, legislated to freeze most working-age benefits for the rest of this parliament and to reduce the generosity of universal credit.

The Resolution Foundation estimates that incomes for the poorest two-fifths of households are set to fall between now and the end of the parliament, after taking account of inflation. In other words, the government faces a challenge just to stop them becoming any worse off, let alone to make them better off.

How will the Autumn Statement help them?

What to do about the Jams is rumoured to have been a bone of contention between Number 10 and the Treasury in drawing up the Autumn Statement. A £100bn black hole is thought to have opened up in the public finances since March. As a result, Mr Hammond has been keen to limit any giveaways and focus what money there is on “productive economic investment”.

But Mrs May is keen to deliver on her promise to help the Jams. The difficulty is that to do something meaningful for a group that numbers perhaps 10m adults is expensive and there is little money to spare.

A freeze in fuel duty and reductions in air passenger duty have both been mooted, along with support for childcare. Mr Hammond also appears committed to delivering on the Conservative manifesto commitment to raise the income tax personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the parliament.

But these policies are not well targeted on low and middle income families. The Resolution Foundation estimates that 85 per cent of the gains from raising the income tax thresholds would go to the richest half of households. In other words, it will be tough to help out the Jams.

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