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The fall in living standards is now moving centre stage in our politics and economics. I suspect it鈥檚 about to over take "the cuts" in political and economic significance.

Real disposable income fell almost 1% in 2010 -- the first "national pay cut" in over decades. Rising inflation and taxes (Vat up, NI about to go up) coupled with slow growth in wages (just over 2% annually when inflation is over 5%) mean it is almost certain to fall again in 2011.

The decline in living standards is already affecting consumer spending, which in turn is undermining retail sales, which are weak. Indeed the retail boom is well and truly over.

The country's high streets and supermarkets are already awash with discounts and two-for-one special offers. Around 40% of supermarket shelves now boast "special offers", an all-time record. Dixons has just issued a profits warning.

A new survey out today will show that consumer confidence has collapsed back to where it was at the height of the financial meltdown.

Rampant inflation has serious consequences for economic policy. When prices (and taxes) are rising much faster than wages -- as they are now -- then people feel the squeeze. They are forced to tighten their belts. They reduce their spending.

But consumer spending accounts for almost 70% of GDP. So when it slows, so does the economy. Hence the downgrading of growth forecasts in last week's Budget.

The normal response to rising inflation is a . Many voices -- including that of the Bank of England Governor -- have resisted, on the grounds that it would slow the recovery. That is indeed a risk.

But rising inflation -- because of its squeeze on living standards -- is also slowing the recovery (as well as increasing government borrowing). So doing nothing is not with its risks to growth too -- and inaction now could mean much steeper rises in interest rates later.

It all depends on whether you think the current rise in inflation is a temporary blip -- or something that will be with us for a while. If the former, you might want to delay raising rates (though some rise is coming later this year whatever happens).

If the latter, then the sooner you start raising rates the better.

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Pretty grim set of economic stats on the eve of Chancellor Osborne's second Budget.

First, public borrowing was 拢11.8 billion in February, the highest borrowing for that month since records began and 拢2.3 billion higher than February last year. Tax revenues are more buoyant than expected but for a government committed to borrowing a lot less these figures show the heavy lifting hasn't even started.

Second, inflation as measured by the RPI, which is used as the basis of many a wage negotiation, rose to 5.5% last month from 5.1% in January. This is much more than expected. Even the more modest CPI, the government's preferred measure, rose to 4.4%.

At a time when most folks' pay is either static or falling in real terms, these inflation figures mean only one thing: a further squeeze on living standards, especially with January's rise in Vat and April's rise in National Insurance.

They also mean interest rates are more likely than ever to rise this year. The markets certainly think so: sterling jumped against the dollar this morning, trading at $1.6359 in the immediate aftermath of the data.

The markets also think there's more inflation to come: bonds fell, with the yield on the 10-year gilt rising 8 basis points to 3.61% as investors demanded higher yields to compensate for higher inflation.

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A new report from the much respected international think-tank of rich countries, the , sheds light on some of the social mobility and education themes I touched on in my recent 主播大秀2 documentary Posh & Posher.

It's a long report but worth the study and I look forward to your comments. Its main conclusion is that:

"Despite sharply rising school spending per pupil during the last 10 years, improvements in schooling outcomes have been limited in the United Kingdom."

How can that be, I hear you ask? The last Labour government doubled per capita spending on pupils and regularly pointed to improving exam results as the fruit of its investment. But the OECD confronts the controversial issue of grade inflation and comes to this conclusion:

"Official test scores and grades in England show systematically and significantly better performance than international and independent tests . The measures used by the Office for National Statistics (ONS) . show significant increases in quality over time, while the measures based on cognitive tests not used for grading show declines or minimal improvements ...

"The share of A-level entries awarded grade A has risen continuously for 18 years and has roughly trebled since 1980 ... independent surveys of cognitive skills do not support this development."听

The OECD report gives cause to look again at the annually improving GCSE and A-level results. It concludes that pupils' actual performance has been "static" and "uneven".

The report also says that, despite the huge increase in resources devoted to state schools, success remains "strongly related to parents' income and background." The OECD concludes that:

"Incomes and educational outcomes are unevenly distributed in the UK compared to many other OECD countries and intergenerational social mobility is low ... schooling out comes in the UK are among the more unequal in the OECD area. This leaves many students from weaker socio-economic backgrounds with insufficient levels of competence, which hampers their chances in the labour market and higher education."

In plain English, the OECD is saying that despite increasing spending on education from 拢36 billion a year to 拢71 billion over the last 10 years or so, we are still seriously failing to open up opportunity to poor kids. Indeed, social immobility might even be on the increase:

"Disadvantaged children seemed to perform worse in 2006 than in 2001, while the impact of parents' incomes on six-year-olds' cognitive and non-cognitive skills has if anything increased recently."

Posh & posher indeed.

Andrew on the One Show (January 20) talking about Posh and Posher

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Here's a pretty objective analysis of what the Tory manifesto told us about health reform from .

Based on my exchange with Tory backbencher on the if you read here you will see that the Tories did pledge GP commissioning but left vague the scale of the change.

Importantly for Lib Dems, it's also in the , though that didn't stop them from voting against the reforms at their spring conference last weekend.

I think it's fair to say the Tories said they'd devolve more power and resources to doctors. It's probably also fair to say they did not spell out how radical this change would be in terms of switching the NHS budget to GPs.

This morning (watch the debate in video听below ) we learned that is not too worried about GP commissioning but against the idea that health care can be commissioned from the private sector using NHS money provided the care is at least to the same standard and cost as the NHS.

But the BMA can't complain it wasn't warned: this policy is explicitly stated in the Tory manifesto.

听BMA's Dr Mark Porter and MP Mark Simmons on health bill on Tuesday's Daily Politics

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In my previous blog I investigated the claim by on Wednesday 1st March's Daily Politics that "onshore wind [turbines] doesn't need subsidy anymore, onshore wind can pay its way."

I wrote that:

"Onshore wind turbine generators don't necessarily get a direct subsidy to build or operate the turbines (though some might) but under the government's Renewables Obligation electricity companies must buy power generated by onshore turbines at twice the market rate.

"This 100% higher price is then passed on to the rest of us in higher electricity bills may conclude that is as much a subsidy as a straight taxpayers' grant."

I concluded that readers were likely to think that enjoying twice as much as the market price, mandated by law, is as much a subsidy as a straight taxpayers' grant.

But I invited the and the to comment and promised to publish whatever they sent us.

Well, we've heard nothing from Mr Hammond's department but this is what we've had from the Department for Energy and Climate Change:

鈥淭he current high oil price, and the increasingly clear evidence on climate change, underline the need to move away from fossil fuels.

"Onshore wind is one of the cheapest forms of low carbon energy and the UK has a massive natural resource to exploit.

"There is no direct public subsidy, but wind energy does benefit from the Renewables Obligation.鈥�

The first sentence is irrelevant to Mr Hammond's claim.

The second would suggest that onshore wind is so cheap and so plentiful that there is no need to subsidise it.

The third sentence confirms that there is indeed a subsidy to onshore wind turbine operators via the legal obligation of electricity companies to buy electricity at artificially high rates (and then pass on the extra cost to us, the electricity consumers).

Note that the DECC does not deny that the is a subsidy by any other name.

And remember the context of Mr Hammond's remarks: he was seeking to differentiate between onshore wind (not subsidised, he said) and offshore (which he conceded was subsidised).

In fact they are both subsidised in the same way but to different degrees. Onshore wind gets to charge twice the market price, offshore three times (because it is much more expensive).

Incidentally, I was told by senior sources last week that the thought it "daft" to be adding to our energy bills in this way at a time of soaring energy prices and was biding its time to "open a second front" against the strong wind power lobby within and around the government.

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I should have got round to this quicker but it's been a busy week! On Wednesday's Transport Secretary said that "onshore wind [turbines] doesn't need subsidy anymore, onshore wind can pay its way."

I expressed scepticism when he said it, but didn't have time to probe his claim. Anyway, since then I've looked into it and here is my understanding.

Onshore wind turbine generators don't necessarily get a direct subsidy to build or operate the turbines (though some might) but under the government's electricity companies must buy power generated by onshore turbines at twice the market rate.听

This 100% higher price is then passed on to the rest of us in higher electricity bills. (The price for offshore generated power enjoys, I'm told, an even higher officially-mandated mark up).

So it's not so much a subsidy in which government doles out billions of our money to keep the turbines going. It's an artificially high price they are empowered by law to charge to keep them going, which is then passed on the rest of us. Otherwise, as I understand it, the turbines would be uneconomic. You may conclude that is as much a subsidy as a straight taxpayers' grant.

That, I emphasise, is my understanding. It's a complicated business and Mr Hammond (or at Energy) may be able to correct me. I know Whitehall departments read this blog so I look forward to the replies of either the Hammond or Huhne departments, whose responses we will of course publish. (see update below)

Readers will no doubt have plenty comments of their own to make.

Watch Johnny Ball's film about climate change scares that prompted the debate

听UPDATE:

We have now heard from the Department for Energy, who want to point blog readers to

A spokesman said: "The current high oil price, and the increasingly clear evidence on climate change, underline the need to move away from fossil fuels.听

"Onshore wind is one of the cheapest forms of low carbon energy and the UK has a massive natural resource to exploit.听

"There is no direct public subsidy, but wind energy does benefit from the Renewables Obligation."

See the newest for Andrew's comments on this.

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Coverage of the government's go-ahead for Rupert Murdoch to buy the 60% of BSkyB he doesn't own has concentrated on the condition that he spins off . Reporting and comment has been devoted to whether or not the somewhat arcane mechanism proposed to house Sky News would be truly independent from Murdoch control/influence.

But I don't think that's what concerns the phalanx of British newspapers -- including such unlikely bedfellows as the , , and -- opposed to the go-ahead. I doubt they much care who controls or influences Sky News; they are not, after all, in the TV business.

They are much more worried about what Murdoch will do with the massive new resources at his disposal if he ends up owning all of BSkyB. Subscription TV is a massive cash generator and BSkyB is a pedigree cash cow. With 100% ownership, profits heading fast for 拢1 billion a year would all flow into the Murdoch coffers.

His newspaper rivals worry that it would take only a fraction of that to be diverted to his newspapers to make life very uncomfortable for them. He could use BSkyB cash, for example, to mount a newspaper price war (he's done it before) designed to drive his competition out of business. Less dramatically he could use the massive marketing reach of BSkyB to promote his papers cheaply -- perhaps even offering digital subs to his papers with a Sky sub.

Click here to watch Thursday's Daily Politics debate on the BSkyB debate and the future of Sky News

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