How much is £1 worth?

An interesting article by Stephanie Flanders, the BBC’s Economics editor. She asks just how much (or how little) the pound in our pocket is now worth. With inflation above target, growth very slow and tax and benefit changes to cut the government deficit, everyone is feeling the squeeze. A key fact that Flanders identifies is that only those in the highest income quintile have actually lost from changes in the tax and benefits system: everyone else has (or will) gain. A very interesting read!

The shrinking pound in your pocket BBC News, Stephanomics (21/3/11)


  1. What are the main factors that have contributed to lower living standards this year? Explain how each factor works.
  2. What changes to taxes and benefits have occurred and what changes can we expect over the coming months and years? Who is likely (a) benefit and (b) lose from each change?
  3. Is it right that the richest families have been affected the most? Find an economic argument for both sides of the debate.
  4. Why have pensioners lost relatively more than other groups?