The UK economy: Insights from the Bank of England’s Citizens’ Panels

Governors’ foreword

At the Bank of England, we are committed to being transparent, accountable, engaged and approachable. Central banks, like the Bank of England, have not always been good at communicating clearly or in an accessible way. But that is changing and we are transforming the way we communicate and engage to ensure we are better understood by the people we serve.

As part of these efforts, we have expanded our education and outreach programme to engage with a wider range of people. We want to be more aware of the issues that affect people, whatever their background and wherever they live in the UK. And our policies are more effective if they are understood by the people we serve. That is true whether you are a borrower or saver, homeowner or renter, business owner, worker or someone trying to find employment.

The Bank has developed a wide range of outreach initiatives in recent years, such as its Future Forum events and community forums. In November 2018, we also launched a series of citizens’ panels across the UK. Because to truly transform the way we communicate, we recognise that we need to listen more.

The citizens’ panels have enabled us to engage in a constructive dialogue with the public about the economy and the financial system. We got the chance to ask for your views, to listen to your stories and to learn how you feel about the economy – and about our work. This complements our existing, well-established network of regional Agents, who act as our ‘eyes’ and ‘ears’ to connect us with local businesses and communities across the country.

At the panel events we were asked a lot of questions. Some of these related to the Bank’s formal responsibilities – maintaining monetary and financial stability in the UK – while others were wider ranging. People wanted to know about the effectiveness of our policies over recent years and how they had affected inequality. We were asked about climate change and what we and the wider finance sector are doing to tackle this. People asked about how we were preparing for an increasingly digital economy. And we had lots of questions about our role and how we interact with government to support the UK economy.

We were encouraged by the positive feedback from those who took part. And we enjoyed meeting people from a wide range of backgrounds. We look forward to continuing these conversations. Given the Covid-19 restrictions in place at the time of writing, it’s likely that face-to-face meetings won’t be possible for the foreseeable future. But we hope to get out and about around the country again as soon as possible, when it is safe to do so.

We would like to thank those who have participated so far and made the events a success. We would also like to thank our chairs, who are independent of the Bank of England, for their engagement and enthusiasm for this initiative. This report is their summary of the key themes emerging from our citizens’ panels.

Chairs’ foreword

Institutions, such as the Bank of England, that make important decisions that affect us all must engage with the public. The citizens’ panels are an exciting initiative that provides a direct channel for people to have their voices heard by those who influence the economy. We think it is vital that the Bank of England listens to the people it serves from across the country to better understand the lived experience of the economy and how it can vary between different places and groups in society.

We represent a broad range of organisations and charities and seek to understand the communities we live and work in across the UK. Collectively we have experience across the private, public and voluntary sectors. Many of us have had a longstanding relationship with the Bank of England, for example through contact with its Agency network. But we have approached this project as independent individuals and representatives of our local areas.

During the citizens’ panels, we acted as chairs for the events in each region and devolved nation. We were there to help each event proceed smoothly and, crucially, to help ensure that the voices of everyone in the room were heard.

We have overseen the compilation of this report. The discussions that it summarises were interesting, extremely varied and provided a useful insight into the views of those attending.

Some of the issues raised in this report are beyond the remit of the Bank of England for example, the distribution of income and wealth. Our hope is that this public report will provide a useful summary to facilitate wider policy discussions and perhaps encourage others to act.

We hope that the Bank continues to engage directly with the public in an open and transparent way. While we understand that the form of that engagement might evolve, we hope that regular engagement with households continues, as it already does with businesses through the Bank’s regional Agency network.

• Denise Bentley
(Co-chair, Greater London)
• Bridget Blow CBE
(Chair, West Midlands)
• Jonathan Cheshire OBE
(Chair, Central Southern)
• Fiona Devine CBE
(Chair, North West)
• Sarah Green
(Chair, North East)
• Julie Hawker
(Chair, South West)
• Cleveland Henry
(Chair, Yorkshire and the Humber)
• Ruth Marks
(Chair, Wales)
• Josephine McCartney
(Co-chair, South East and East Anglia)
• John McMullan OBE
(Chair, Northern Ireland)
• Jim Minton
(Co-chair, Greater London)
• Susan Rice DBE (Chair, Scotland)
• Stephen Singleton
(Co-chair, South East and East Anglia)
• Martin Traynor OBE
(Chair, East Midlands)

Executive summary

In November 2018, the Bank of England launched its citizens’ panels programme. These panels give policy makers the opportunity to speak directly with the people they serve, and are part of wider work to improve engagement with the public. Since the programme’s launch, the Bank has held 23 citizens’ panels across the UK, attended by 492 people. This report from the independent chairs summarises the discussions at those events.

Panellists discussed a wide range of topics relating to the UK economy and financial system and similar issues cropped up across the country.

In this report, we explore the key themes. We also take an in-depth look at housing and jobs which were the subject of particular focus at the panels. The report includes sections on each of the following:

• Uncertainty, Brexit and Covid-19
• Inflation and living standards
• Inequality
• Debt, credit and the banks
• Financial literacy
• Climate change
• In focus: Housing
• In focus: Jobs and pay

Uncertainty and insecurity were key themes. The first round of panel events took place between November 2018 and July 2019 – a period of exceptional political turbulence. Brexit, while not a major discussion topic in and of itself, had significantly raised the level of uncertainty for people and businesses.

The second round of panels took place between September 2019 and February 2020. Most panel members felt uncertainty had reduced following the December 2019 general election, which had resulted in an uptick in consumer confidence and strengthening of the housing market. However, other sources of uncertainty emerged, such as the outcome of future trade deals and, more recently, the sudden spread of Coronavirus (Covid-19).

Panellists expected Covid-19 to have a large and long-lasting impact on the economy and society more broadly. Some expected changes in consumer behaviour to continue beyond the lockdown, with – for example – people potentially choosing to save more in the future.

The panels took place during a period when the unemployment rate was at record low levels. Yet many panel members told us they felt uncertain and insecure in their jobs. Alongside the uncertainty associated with Brexit and other factors, panellists noted some structural changes in the labour market. The rise of contract work, for example, while supporting flexibility, was seen to be creating a more uncertain work environment. Many people – even those in jobs that appeared secure – worried about redundancy or having their contracts terminated or not renewed.

Panellists felt employment statistics were not a true reflection of the reality for them or others. People thought that zero-hour contracts and underemployment were distorting the data. But improvements in flexible working were seen to be supporting women and older workers back into the labour market, alongside some welfare reforms. Panellists thought the Covid-19 outbreak could potentially accelerate the shift towards more flexible working models. Experiences of pay rises were patchy and increasingly targeted at those in areas with pressing labour shortages, for example those with coding skills. Younger people said they didn’t recognise the concept of ‘across the board’ annual pay increases. Some people mentioned that they were earning less now than they had before the financial crisis and few expected substantial pay rises in the near future.

There was widespread concern about the level of inequality across the UK, both across regions and across generations. Regional imbalances were a major concern, with panellists talking of a clear ‘North/South’ divide. Many saw a need for better investment, especially in transport, outside the South East of England, arguing that this would help people to find work. Younger generations were perceived to be worse off than their parents – a source of concern for people of all ages. And poverty – particularly among those in work – was seen to be a growing problem, including a perceived rise in homelessness.

People recognised that low interest rates had been necessary to support the economy during a period of weakness and uncertainty since the financial crisis. But attendees felt that low interest rates were contributing to a culture of debt, with concerns that many people do not have any significant savings and are probably unprepared for rate rises to more ‘normal’ levels in the future. There was a need for better financial education to help prepare people for making financial decisions. And some older people raised concerns about the lack of return on their savings.

Panel members agreed that housing was an important part of their economic wellbeing. Some lamented the way property had become widely thought of as an ‘asset’ rather than a place to live. Many said that housing was unaffordable, both to rent and to buy, especially in London and the South East. Many felt that policy interventions were needed to address these issues, including boosting the supply of new homes.

Introduction

The Bank of England recognises that it needs to be transparent, accountable, engaged and approachable. To achieve this, it has taken steps to make its work more accessible through initiatives such as a new education programme; revamped publications; a simple online guide to boost financial literacy (KnowledgeBank); and other outreach initiatives.

The launch, in November 2018, of the citizens’ panels followed a recommendation in a report by The Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA). In ‘Building a public culture of economics’ , the RSA noted that to build a strong democratic discourse about economics it is, ‘essential to meet people where they are; to proceed from people’s everyday experience of the economy through work, at play and in their communities’.^{footnote [1]} In a speech in March 2018, the Bank’s Chief Economist Andy Haldane set out how the Bank would use citizens’ panels to listen to the people it serves to help inform its work.

Spotlight: The Bank of England and Outreach

In recent years the Bank has worked hard to engage with more people from all backgrounds across the UK.

The Bank has held a number of Future Forum events across the country, which were attended by hundreds of members of the public and hosted by the Bank’s Governors. These events addressed a range of themes such as: how the Bank can serve society and maintain stability in times of change; financial and economic education; and the future of money.

As part of its outreach work, the Bank has also organised community forums across the country since 2017. These events target harder-to-reach groups, especially the economically and financially disadvantaged – groups who are typically not well represented at the citizens’ panels. They are run in partnership with charities across the UK and allow charity leaders and their staff, along with the people who rely on their services, to speak to Bank of England officials about the financial and economic issues these groups face. Topics included barriers to employment, debt, in-work poverty, and funding for the voluntary sector.

During 2019 the Bank organised community forums with Depaul UK, a charity that helps homeless young people; the Glasgow Council for the Voluntary Sector; the Faith Centre in Bradford, which supports refugees in the city; the debt charity Christians Against Poverty; and a number of Community Foundations across the UK, which support thousands of grassroots organisations.

In April 2019 Deputy Governor Sam Woods attended a community forum in Dundee. The forum included a roundtable event with local charities that support vulnerable people in the city, plus a visit to a community garden project, and a church-based youth club.

‘We saw some vivid examples of how the most vulnerable people in our society are often most affected when the economy goes wrong, as happened with the financial crisis in 2008,’ Sam said, reflecting on his experience at the event. ‘More than a decade on, I got the clear sense that some people in Dundee are still feeling the effects.’

‘I heard about food banks, in-work poverty, fuel poverty, welfare reform, the premium poorer people pay for basic services like energy, and the insecure funding landscape faced by charities. Despite a host of worries the group was very keen to look forward, to explore solutions, and to commit to collaborate more effectively for the good of the city and its most vulnerable residents.’

The Bank is keen to have an ongoing relationship with the partners who host our community forums. This is often done through the Bank’s network of Agents. Following the Covid-19 outbreak, the Bank reconvened – in virtual form – this community forum to understand how different parts of society in Dundee have been affected by the crisis.

Footnotes

• Deputy Governor of the Bank of England, Sam Woods, centre, during his visit to the community garden project in Dundee.

The Bank sought advice from a number of experts in public consultation, including from the RSA, to design the citizens’ panels. A key aim was to have a wide and diverse mix of people, reflecting the public that the Bank serves. With this in mind, the Bank selected attendees from those that registered taking into consideration the age, gender, ethnic background and income mix of panels. Overall, panellist diversity broadly reflected the UK population but some groups were a little underrepresented (notably women, under 25s and those on lower incomes).^{footnote [2]}

Between November 2018 and February 2020, 23 panel events were held across the UK (Figure 1 - map).^{footnote [3]} The Bank decided to limit attendance for each event to about 24 people, to enable everyone to share their views. Representatives from the Bank of England Youth Forum attended some events to ensure the voices of those aged under 25 were heard (Spotlight: The Bank of England Youth Forum).

Feedback from panel members was very positive. Around 95% of attendees agreed that the events were interesting and relevant, increased their understanding of the Bank’s responsibilities and encouraged an open discussion. Seventy-five per cent agreed the event increased their trust in the Bank and over 90% wanted to find out more about the work of the Bank of England.

Figure 1: Citizens’ panels were held in a wide range of locations

A senior member of Bank staff (either a Governor, Executive Director or Director) attended each panel.^{footnote [4]} During the pilot phase all Governors attended at least one panel event. Most meetings were chaired by an independent figure drawn from the local community.^{footnote [5]}

Spotlight: The Bank of England Youth Forum

In 2019 the Bank of England recruited its first youth forum as part of a pioneering partnership with the British Youth Council. This was partly in response to the low number of people aged under 25 applying to take part in the citizens’ panels. Comprising 24 young people aged between 16 and 25 who live across the UK, the group is working with the Bank for a year across a range of projects.

The Bank of England Youth Forum is helping the Bank to research young people’s experiences of the world of work and to assess the state of financial and economic education in schools. It is also providing a youth voice on a range of policy issues and helping the Bank to communicate its decisions in a way that young people understand. In April 2020 the youth forum ran a consultation with young people to learn about how they were being impacted by the Covid-19 crisis. This attracted almost 1,000 responses and members of the youth forum presented the findings to the Bank’s Chief Economist Andy Haldane via a conference call.

Members of the youth forum took part in some of the citizens’ panels to provide a young person’s perspective on the major economic and financial issues of the day. The youth forum will publish, via the Bank’s website, updates on its work.

Footnotes

• Youth forum members at their residential induction weekend.

In September 2019, an online community was launched to enable the Bank to continue discussions with panel members. The community features a number of discussion forums on topics such as Covid-19, housing and jobs and pay. It has been used to host Q&A sessions with Bank officials. A monthly survey and forecasting challenge has run on the website since September 2019. By early May 2020, there were more than 550 registered users of the online community. This has enabled the Bank to continue engaging with panellists during the Covid-19 outbreak.

The 23 panel events and contributions on the online community provided insights on how people think about the economy and the challenges people face. Across the country, there were lively discussions on a wide range of topics, from inequality and income, to Brexit and the banks. In the following section, we explore the key themes that emerged.

Uncertainty, Brexit and Covid-19

A key word at all the panels was ‘uncertainty’. This related to the political and economic outlook, largely associated with the UK’s withdrawal from the European Union. Panellists also pointed to an uncertain work environment, brought about by changes in the labour market (see In focus: Jobs and pay). At the most recent panels, Coronavirus, or Covid-19, was flagged by attendees as an increasing worry and source of uncertainty. By the February online survey, which concluded in mid-March, Covid-19 was cited as the biggest threat to economic health (Chart 1).

The first round of panel events took place during a period of exceptional political turbulence. Brexit deadlines came and went and the country went to the polls in a general election in December 2019.

Brexit itself was not a major topic of discussion at most panel events, although it featured heavily in the online surveys. It is possible that panellists did not want to discuss a politically sensitive, and often divisive, topic in person. For many, other issues were more immediately relevant and important. Some saw Brexit as ‘just another thing’ distracting from the ‘real problems’ affecting people’s daily lives, such as the cost of living, transport, education and the NHS. Others reported that they felt ‘mentally worn down’ by Brexit. In contrast, Brexit was one of the most frequently mentioned threats to economic health on the citizens’ panel online surveys, although it declined in prominence in the later surveys (Chart 1).

Chart 1: Covid-19 was seen as the biggest threat to the economy, with references to Brexit falling over time ^(a)(b)(c)

Footnotes

• (a) Free text answers to the online survey question ‘What do you think poses the biggest threat to the economic health of your community?’ grouped by theme.
• (b) Fraction of responses refers to the number of times a theme was mentioned each month as a proportion of the number of responses that month. Responses could include more than one theme.
• (c) ‘Uncertainty’ was also a common theme but highly correlated with Brexit and so is not included in this chart.

The majority of the second round of panel events took place in early 2020, following the December 2019 general election.

Following the result of the general election there were mixed views on the economic outlook and level of uncertainty. Many felt the country was at a turning point. Some uncertainty had lifted, at least in the short-term. The significant Government majority was seen by some as providing greater clarity on the likely outcome of the Brexit negotiations and most agreed domestic political uncertainty had reduced. However, others still felt significant uncertainty remained, albeit at a slightly lower level, and there was a distinct lack of optimism for many. It was noted in Scotland that there were additional uncertainties on the implications for independence.

Panel members recognised that on leaving the EU there would be a period of adjustment and the transition was likely to be long. The Brexit process was expected to continue for many years, and any trade deals could take several years to agree. Any impact from leaving the EU, which was ‘unknown’, was therefore expected to be felt for several decades. This protracted long-term uncertainty was a concern for many.

There were mixed views regarding the potential benefits and risks from leaving the EU. Some thought reduced ‘red tape’ could boost productivity. A shift in focus towards domestic production, instead of EU imports, could also promote new opportunities and boost the economy. Panel members in Northern Ireland thought that there could be opportunities for businesses there, such as the ability for firms to sell to both the EU and UK.

Panellists across the country were worried about potential job losses, including from companies leaving the UK. These concerns were especially noticeable at the panels held in South Tyneside, Liverpool and Coventry, all of which have large automotive plants nearby. Many panellists around the country expected prices to go up, especially for food where new tariffs or a weakening in the exchange rate could drive up imported food prices.

The uncertain political and economic climate was thought to have affected businesses’ hiring and investment decisions and household spending in 2019. This was true for both first and second round panels. Some panellists felt that businesses had the cash ready to invest but were waiting until the future was clearer. Several said uncertainty had affected their own spending, for example putting off big decisions, such as buying or moving house, buying a new sofa or decorating, because of the uncertain economic outlook. The impact of Brexit uncertainty on businesses and individuals was thought to be holding back economic growth, which was seen to have ‘flat lined’ in 2019.

Generally, there continued to be a feeling of pessimism regarding the outlook for the economy. The ‘live poll’ taken at each of the second round panels suggested more people saw the prospects for the UK economy over the next six months as poor than good (Chart 2). Several panellists felt the UK remained on the cusp of recession. Others were more optimistic and thought local businesses and entrepreneurs had innovative ideas that could drive growth. And some saw opportunities for green industry to promote innovation and production. However, longer term, some thought growth was unsustainable due to a lack of long-term investment, both in industry and in the workforce.

Chart 2: Panellists were pessimistic about the short-term outlook for the UK economy ^(a)(b)

Footnotes

• (a) Question: How do you rate the prospects for the UK economy over the next six months?
• (b) Results from 209 responses from polls taken at 10 panel events between September 2019 and February 2020.

An additional source of uncertainty that emerged during the February 2020 panels was Covid-19.^{footnote [6]} Many panellists were concerned about the potential for large scale infection and the impact this would have on the economy and society. At the February panels, some had already been directly affected, with staff in their business quarantined and supply chains affected. And those with financial assets had already started to see the value of their shareholdings fall dramatically.

Discussion of the impact of the virus continued via the online surveys. References to ‘Coronavirus’ or ‘Covid-19’ increased markedly, overtaking ‘Brexit’ by the February survey (Chart 1). By the March survey, that closed mid-April, the virus was by far the biggest threat to economic health cited by panel members. Panellists were worried about the impact on small businesses due to reductions in cash flow, as well as the impact of the virus on those sectors that typically thrive in summer, such as the retail, leisure and tourism sectors. And panellists thought the crisis could accelerate the demise of the high street. Agriculture was also expected to struggle to recruit workers for harvest.

Many were concerned about the longer term economic impact of the social distancing measures introduced to stop the spread of Covid-19. Several noted the uncertain time scales involved and were concerned about the absence of an ‘exit strategy’. This was thought to be making it difficult for businesses to plan. Economic recovery was expected to be slow. As well as being unsure of when economic activity will resume its normal pattern, some expected ‘lasting scars’ in the form of ‘fear of the future’, which could cause consumers to save more and spend less.

Some panellists praised the response of the government and the Bank of England. However, it was noted that the implementation of measures, such as the packages for businesses and the self-employed, would be ‘administratively complex’. And some panellists were concerned that the funding put in place for businesses was proving difficult to access via the banks. Others felt a more universal government-backed approach focussed on individuals, such as a basic living wage, would ensure everyone was supported.

Several panellists were concerned about the implications of the fiscal package on future taxes and spending. There was an expectation that ‘Austerity II’ in the future would cause additional damage because ‘there is nothing left to cut’.

Panellists thought the reduction in domestic and international travel would help to reduce carbon dioxide emissions. And some panellists expected the Covid-19 outbreak to accelerate the shift towards more flexible working models, for example working from home and non-standard hours (see In focus: Jobs and pay).

Spotlight: Evidence from the online surveys

The Bank of England set up an online community in 2019 to keep in touch with people who had attended its citizens’ panels. In September 2019, the Bank introduced monthly online surveys for members.  Participants were asked about their views on the economic health of their local community, their personal financial circumstances, inflation and unemployment. 

In the latest survey conducted between late March and mid-April 2020 there was a marked deterioration in the outlook for growth, unemployment and participants’ views on their own personal financial situation. Unemployment was thought to have increased in the most recent survey (Chart A, blue line), and people expected unemployment to increase further (Chart A, red line). While current financial conditions improved earlier in the year (Chart B, blue line), possibly a post-election improvement due to reduced Brexit uncertainty, expectations about future financial conditions have deteriorated (Chart B, red line). This decline is most likely related to the Covid-19 outbreak.

Chart A: People’s perceptions of current and future unemployment have increased ^(a)(b)(c)

Footnotes

• (a) Responses to the questions ‘Unemployment in the recent past: How do you think the rate of unemployment has changed in your region in the past six months’ and ‘Unemployment in the near future: How do you think the rate of unemployment will change in your region over the next six months?’.
• (b) 426 total responses from online surveys conducted between September 2019 and mid-April 2020. Highest number of responses was 89 for the February survey.
• (c) Multiple choice text answers have been converted to numerical values for visualisation. The range refers to one standard deviation around the average (mean) response for each month.

Chart B: People, on average, expect their personal finances to deteriorate over the next six months ^(a)(b)(c)

Footnotes

• (a) Responses to the questions ‘How satisfied are you with your personal financial situation, judged by your income, cash at hand and financial security?’ and ‘How do you think that your personal financial situation will develop over the next six months?’.
• (b) 426 total responses from online surveys conducted between September 2019 and mid-April 2020. Highest number of responses was 89 for the February survey.
• (c) Multiple choice text answers have been converted to numerical values for visualisation. The range refers to one standard deviation around the average (mean) response for each month.

Brexit, Coronavirus and uncertainty are key words used when describing threats to economic health

Footnotes

• (a) Word cloud of survey responses to question ‘What do you think poses the biggest threat to the economic health of your community?’

Inflation and living standards

Consumer Price Inflation (CPI), a measure of how much prices have gone up over the past year, averaged 1.8% over 2019.

Many people were concerned about rising food and fuel prices and the disproportionate impact this has on lower-income families as these goods account for a larger share of their total spending. Panels discussed the ‘poverty premium’,^{footnote [8]} where those on low incomes pay more for essential goods and services, for example greater use of pre-payment energy meters, which charge a higher rate. They can also face more expensive access to credit (eg pay day loans). Some noted a frustration that benefits are linked to the CPI, while many controlled prices such as rail fares are linked to the Retail Price Index (RPI). This is a different measure of inflation, which is typically higher than the CPI.

Official data show that wages have gone up faster than prices over four of the last five years.^{footnote [9]}

In contrast to the data, there was general agreement amongst panellists that the cost of living had been going up faster than wages and this was eroding living standards. This perceived disconnect between inflation and pay, combined with a reduction in welfare support (prior to the measures introduced to offset the effect of the Covid-19 pandemic), was thought to be leading to growing numbers of ‘working poor’.^{footnote [10]} Many viewed the National Living Wage as inadequate, with people having to take multiple jobs to make ends meet. Panellists across the country were concerned about the increasing reliance on foodbanks for many households (including some in work), although personal experience was limited. These concerns were particularly acute for those working in the voluntary sector who were aware of their clients’ dependence on these services. It was noted in the March online survey that one foodbank was struggling to meet the overwhelming demand since the Covid-19 crisis.

To offset the increasing cost of living, some panellists had changed their shopping habits. This included changing to lower-cost supermarkets, substituting premium or branded goods with cheaper alternatives or switching suppliers eg for energy and broadband. Shopping habits were also seen to have shifted towards online, driven by convenience and cost.

Panellists saw the move to online shopping, along with high rents and business rates, contributing to the ‘collapse of the high street’. There was consensus that the decline of the high street was one of the biggest threats to the economic health of local communities. The decline would most likely be exacerbated by Covid-19. Some panellists felt there needed to be a review of business rates and other costs (including ‘red tape’) to support local high-street businesses.

Panellists felt that the decline of the high street was disproportionately affecting certain groups in society. This includes those without bank accounts or those without internet access.^{footnote [11]} In addition, those that are less mobile and unable to travel to out-of-town retail outlets face a more limited choice in how they spend their money, sometimes meaning they have to pay a premium compared with others.

Inequality

There are different ways to measure inequality, including looking at inequality in incomes and inequalities in wealth. These measures have moved around slightly differently. Overall official data show inequality has been broadly stable since the financial crisis, but the public’s perception of inequality does not always align with the statistics.^{footnote [12]}

Most panellists felt inequality had risen. This was generally felt to be true for both wealth and income inequality, although people typically spoke about inequality in general terms and did not distinguish between the two. Many panellists felt that economic growth was not benefiting all members of society equally and that we live in a divided, ‘two-tier’ economy where ‘there is a stark difference between the haves and have nots’.

Panellists spoke about both geographic and generational inequality. ^{footnote [13]} They identified a clear ‘North/South’ divide, with panellists from the North often feeling like ‘poor relations’. The perception of a ‘North/South’ divide was widespread across the country, including among those living in London and the wider South East.

Panellists across the UK felt that wealth and decision-making was too concentrated in the South East. They also felt that investment in infrastructure, eg transport, favoured London. London was seen to be ‘taking the lifeblood’ out of other areas as large numbers of young graduates move there, attracted by higher pay and better opportunities. For some, higher living costs in London were a barrier to moving there, hindering social mobility. While the gap between London and the rest of the country was marked, panellists also pointed to a wealth divide within regions, notably between major regional cities, and some towns and rural areas.

Concerns about generational inequality, and its implications, were voiced by panel members of all ages. Panellists felt that younger generations were worse off than their parents. Older generations had benefited from free university education, a better pension and a house that had increased significantly in value relative to what they paid.

The discussion on inequality often turned to the perceived rise in levels of poverty and homelessness. This was felt to be at odds with aggregate economic growth figures, reinforcing the view that the economy was not working for all. Panellists thought the rise in poverty was in part a result of continued austerity measures that had ‘hollowed out’ public services. The cuts to benefits and public services following the financial crisis were viewed as disproportionately affecting the most vulnerable in society. There was a positive view of the voluntary sector that had stepped in to fill the gaps in public services created by funding cuts (eg libraries), but it was acknowledged that these too were stretched. Lack of funding for social care and health were seen by some as the biggest threat to their community. And many noted that the benefits system needed improvement.

Some panellists also felt that other policies, such as the Bank’s quantitative easing programme, increased inequality. It was argued that asset purchases had only benefited those holding assets, who were typically the more well off, and had, if anything, created an asset price bubble. There was a general feeling that ‘the money didn’t go where it was needed’ while others saw QE as having ‘no real benefit’. Some felt a ‘People’s QE’, which gave money directly to the public, would have been a better policy. And while some accepted the Bank’s explanation of the impact of QE (Spotlight: The Bank of England and the distributional impact of monetary policy), many remained sceptical.

There were concerns about the declining use of cash and the impact of this shift on certain groups. A move towards a ‘cashless society’ was viewed as a negative for those who rely heavily on cash, such as older people and homeless people. The digitisation of the economy in general, while delivering benefits, risked excluding some people.

Debt, credit and the banks

Levels of debt in the UK have been rising but at the start of 2020 remained below pre-crisis levels for households and corporates. Debt – personal, corporate and government – was a topic that came up at many panels.

There was a general concern that low interest rates, which had reduced the cost of borrowing, and a lack of real pay growth, had created a culture of debt. As a result, many panellists believed that the UK had a level of debt that was too high to be sustainable. Some felt people were spending beyond their means, particularly via credit card debt. While many felt it appropriate or necessary, some were concerned about the increase in private and public debt resulting from the Covid-19 crisis and the impact this could have on individuals and the country’s future financial position.

Some panellists expected to be in debt all their life. Some younger panellists with relatively high levels of student debt never expect to repay their loan. They regarded student loans as ‘a tax on future earnings, which previous generations did not have to pay’. Student loans were seen to be intensifying generational inequality. Living with a relatively high level of debt from such an early stage in life was also said to be affecting financial decisions, such as whether to try to save for a deposit on a house.

Panellists also felt that low interest rates had affected consumer behaviour. Younger panel members (eg those in their 20s) noted that they were less inclined to save, discouraged by low interest rates.

Inflation was seen to be eroding savings in a world of low interest rates. This was a concern of many, especially older panel members who saw their savings as ‘losings’. The erosion of the value of savings and low returns had meant some panellists had been unable to retire. The recent reduction in interest rates to 0.1% (in response to Covid-19) had also affected the returns on savings, which some pensioners relied on as income.

Low interest rates meant some panellists saw ‘no point in saving’. Others were worried that many adults in the UK lacked any significant savings ‘buffer’ and were therefore not as financially resilient as earlier generations.^{footnote [14]} For these people, any unexpected costs or loss of income would have to be met by borrowing (often at premium rates if they lacked security to borrow against). Some people noted that Covid-19 highlighted this issue and felt it might result in a long-term change in consumer behaviour, with households saving more and spending less in the future to be more financially prepared for shocks.

There was a consistent view across the country that people are underprepared for interest rate rises. The exceptionally long period of low interest rates meant that many younger borrowers had little experience of ‘normal’ interest rates, a concern largely related to mortgage debt.

In the past, some panellists noted that you could talk to your bank manager about payment issues. But the relationship between borrower and lender had broken down as the number of high-street bank branches dwindled. The loss of bank branches and ATMs was a concern of many, especially in rural areas. In Wales, one panel discussed plans to create a new community bank to fill gaps left by the departing high-street banks. The decline in bank branches was also a problem for small business owners who felt it reduced their access to expert financial advice.

Access to credit for small businesses was generally perceived as difficult. Banks were felt to be ‘reluctant to take a chance on small businesses’. Some thought this was a consequence of changes to the regulatory environment for lenders making it less attractive to lend to small businesses. One panellist working with social entrepreneurs said they were struggling to get short-term loans to help buffer against changes in their cash flow because they didn’t have anything to offer the Bank as security, for example a house. This was in contrast to the mortgage market where some panellists saw an ‘over-abundance’ of housing finance. However, it was acknowledged that there was logic to the banks’ preference for mortgage lending over SME finance as ‘lending against assets is the safest route for them’.

Personal credit was thought to be readily available for most people, but not necessarily affordable. Panellists felt that lenders were not rewarding loyalty, with the best deals only available to new customers. Those with a poor credit history were facing very high interest rates or being denied access to loans. Panellists felt that the pricing of many financial products did not reflect the low interest rate environment.

Some panels discussed the perceived lack of affordable credit for the poorest in society. It was noted that people who do not have a bank account are denied access to traditional bank credit. This could force the most vulnerable towards more expensive and less safe options, such as loan sharks or pay day loans. Some panellists supported greater use of credit unions and these were seen as an important source of finance for vulnerable people.

Financial literacy

Low levels of financial literacy across the UK were a serious concern for many. More financial education, both at school and beyond, for example, on how to make financial decisions and manage personal finances, would be welcome. Panellists felt that a ‘curriculum for life’ to cover the basics and better equip people for the ‘real world’, was essential. People thought the Bank should do more to support this. The Bank is working to make financial and economic matters more accessible by using simple language and layered content.

More accessible advice for those struggling with the burden of debt would also be welcome. While better financial education might prevent some from taking on too much debt, panellists felt more support was needed for those already in financial distress.

Spotlight: The Bank of England and financial education in schools

The Bank of England is committed to equipping the next generation with the tools and skills they need to understand the economy, as well as the Bank’s role in it and how it affects their own lives.

The Bank launched a new education programme in 2017 to help achieve this.

‘EconoME’ is a free educational resource for 11 to 16 year olds that provides young people with a greater economic awareness and the analytical skills to make informed decisions. Other tools include guidance for teachers on how to help young people understand their feelings about money, financial decisions, careers and the economy. A new resource, aimed at 6 to 11 year olds, is currently being developed to help raise primary school children’s awareness of money, prices and the Bank of England’s role.

The Bank also runs a Bank Ambassador programme which sees its staff visit state schools across the UK each year. During 2019, Bank staff carried out 382 visits to give talks on a range of topics related to the economy to children of all ages.

Footnotes

• Bank of England Deputy Governor Jo Place delivers a Bank Ambassador talk at Horsforth School in Leeds in February 2020.

Climate change

Climate change was a major concern across many panels and featured heavily in the Q&A sessions. Panellists agreed that there was a role for the finance sector and the Bank in tackling climate change. Panel members were very interested in the Bank of England’s work on addressing climate change (Spotlight: The Bank of England and climate change). However, some felt stronger leadership was needed by government and that the UK needed to do more to tackle climate change.

Many were unclear how the world economy was going to transition to a more sustainable economic model. Some thought the current model of continuous growth could not continue in a world of finite resources. And others were concerned that progress towards sustainable growth was too slow.

Many felt pension funds were overinvested in fossil fuels and were concerned about the risks this created both for the environment and for pensions. Panellists felt that while consumers can and do challenge businesses to ‘be more green’, governments should be doing more to change the behaviour of individuals and firms. This could include incentivising investment in new technology and encouraging banks to deal in green finance, including for green housing. Some panellists felt the UK was well placed to lead the way in developing new technologies and products and green industry could be an important driver of growth in the future.

As well as a general discussion on the wider economy, the panel events also featured dedicated group discussions on housing and the labour market.

In focus: Housing

House price growth in the UK has generally slowed since 2016, but picked up towards the end of 2019. The proportion of people who own their own home has remained broadly level in recent years around 63%, and is well below pre-financial crisis levels of about 70%. Mortgage rates were broadly unchanged in 2019 with lending conditions remaining favourable.

These discussions took place prior to the Covid-19 crisis and the associated material slow-down in the market.

Housing was widely perceived as a key pillar of the economy. A number of key themes emerged from the discussions between panellists, who included homeowners (with and without mortgages), renters of private and social housing, and adults living with their parents.

Homeownership was seen as a core British value and most panel members aspired to own their own home, if they didn’t already. Panellists thought this ‘national ambition’ stemmed from a desire to invest in the future; either to pay for retirement, future care or to pass on to children. In contrast, renting was frequently seen as ‘throwing money away’, though some younger panel members highlighted the flexibility it afforded them especially during the early years of their careers. Homeownership was also felt to provide security and stability, particularly by older panel members.

There was some debate about whether a house should be seen as an ‘investment’ or a ‘home’. The general feeling was it should be a home, but panellists noted the societal shift towards investing in property. Some landlords noted the impact Covid-19 was having on their income as tenants struggle to pay rent and any capital is tied up in the property.

Owning your own home was seen as becoming harder, especially for younger people. The rental trap, where renters struggle to save enough for a deposit due to high rents, was preventing people buying a home. Many are forced to live with family members while they save. Others rely on the ‘Bank of Mum and Dad’ to raise a deposit. This reliance on the older generation was thought to be reinforcing the wealth divide discussed earlier, as those with wealthier parents get a ‘head start’.

Panellists noted a disconnect between property prices and incomes: increases in house prices have far exceeded wage growth, making homes unaffordable. This was seen to be even more of an issue in the South of England, reflecting higher house prices there. It was viewed as extremely challenging for people to buy on their own (rather than as a couple) as high house prices and stricter mortgage lending rules meant often two incomes were required to afford a mortgage.^{footnote [15]} The changing nature of employment, with a shift to more fixed term or zero-hour contracts (see next section), was also seen to be preventing access to mortgages (eg because people struggled to prove their future income) and therefore homeownership.

Low interest rates, quantitative easing, Government policies such as Right to Buy and Help to Buy,^{footnote [16]} and limited supply of new housing were seen by panellists as key drivers of house price increases.^{footnote [17]} Demographic drivers, such as people living alone and family breakups, were also thought to be increasing demand, and therefore pushing up prices.

Panellists noted that one consequence of rising house prices has been to break up communities, as in some cases the next generation cannot afford to buy a home near where they grew up.

There was a strong consensus that there was not enough housing being built, or at least not enough of the right types of housing in the right places. Specifically, there was too much new high-end property and student housing when people felt more ‘affordable’ and social housing was needed.

Several people noted that new so-called ‘affordable’ housing was often too expensive for local people. People raised concerns that new-build villages sometimes lacked essential infrastructure and services, such as schools and transport.

A consistent view across the country was that new homes were often being bought by ‘outsiders’. This could be foreign investment, buyers from outside the region (eg people relocating from London or neighbouring regions with higher property prices), or people buying properties to rent out. Generally, this was seen as undesirable and many people felt second homeownership should be made less attractive.

The perception was that, across the UK, renting was now becoming more common. This partly reflected the challenges to homeownership noted above, but also a shift in the younger generations’ attitude and willingness to rent long-term.

Renting was seen as more flexible, as it helps workers remain mobile. In contrast, the high cost of moving house (from stamp duty and transactional costs) constrains movement for homeowners. The lower moving rate may also reflect ‘mortgage prisoners’: borrowers tied into a mortgage and unable to move because regulatory changes mean they would be denied a mortgage based on the new rules introduced by the Bank of England (Spotlight: The Bank of England and the housing market).

Many panellists believe the UK private rental market is inefficient. Panellists generally viewed renting as providing little security and stability as longer-term rental contracts were generally not an option. There appeared, in some cases, to be a breakdown in trust between landlord and tenant. Renters were felt to be at risk from ‘predatory landlords’ who charge high rents for poor quality accommodation that can be withdrawn with little notice. Large rental down payments (often not refunded) and high fees were seen as barriers to renting. Panellists felt the rental market needs stricter regulation.

Lack of affordable and social housing and soaring property prices were seen to be forcing up rents. Given low interest rates, most people thought it was more expensive to rent than pay a mortgage. But many complained that they, or people they know, were unable to access the housing market because they could not afford to save for a deposit or could not get a mortgage due to affordability checks.

The cost of privately renting and a lack of social housing, alongside some welfare changes, was seen to be pushing the poorer in society into homelessness and denying them a basic right to shelter. Panellists thought breaking the cycle of homelessness was a challenge given the difficulties in getting a job without a bank account, for which you need an address. Landlords were seen as unwilling to rent to those on benefits or those with flexible work contracts. Homelessness was seen ‘beyond the streets’, with people ‘sofa surfing’ because they cannot afford the down payment or high rent.

The panels discussed the future of the housing market and what could be done to improve things. Suggestions included an independent review of the structure of the housing market; regulation of the rental market with longer tenancy agreements and possible rent controls; central government infrastructure schemes to improve transport connections; and regional housing policies to support or incentivise buying in areas with a weaker housing market.

Some felt there should be a relaxation of loan to value (LTV) constraints, the amount you can borrow against the value of your house, to enable those with smaller deposits access to the mortgage market. However, others saw this as too risky, especially if house prices were to fall as it could lead to people having mortgages larger than the value of their property. This is known as negative equity.

In focus: Jobs and pay

In 2019 unemployment reached its lowest level since 1974. While official data show that unemployment averaged 3.8% in 2019, perceptions at the panel events were that ‘true’ unemployment was higher than this.^{footnote [18]} And unemployment was expected to go up significantly given the emerging Covid-19 crisis.

One of the most frequently-cited reasons to explain this gap between perceptions and the data was the type of employment and the rise of the ‘gig economy’.^{footnote [19]} Panellists thought there had been a change in the structure of the labour market, with a move from full-time permanent work to self-employment, contract-based work or part-time work. This shift was thought to be distorting the statistics, implying a higher level of employment than was actually the case and masking the uncertainty many felt about work.

Contract work was thought to be more common but was creating a more uncertain work environment. This included the rise of zero-hour contacts.^{footnote [20]} Zero-hour contracts, which are typically associated with low-skilled jobs, were thought to work well for some, for example students who may want the flexibility and choice it offers and may not need the certainty of a regular income. Fixed-term or temporary contracts were seen to offer flexibility with a period of certainty, often at a higher wage than a permanent equivalent. However, on balance most viewed the shift to contract work, especially zero-hour contracts, negatively as it offers little job security, increases uncertainty and makes it significantly harder for workers to plan or get a mortgage.

Some panellists noted the recent Covid-19 restrictions had severely affected those on less secure contracts, and many faced having their contracts cancelled or not renewed, highlighting the insecurity associated with contract work.

Several panels discussed the upcoming changes to the rules governing the way contractors are paid (IR35), and the effect this could have on the contractor market. Some worried that there would be potentially unconsidered consequences from the change that would reduce employers’ ability to make ‘agile hires’ and make it harder for individuals that want the flexibility to work as contractors.

Many panellists saw the rise of contract work as evidence of a shift in power from employees to employers. Employers were thought to be benefit from reductions in costs and the ability to flex their workforce, while risks and costs moved to the employee.

Some of the changes in the labour market were cited as positives by panellists. For example, flexible working (a way of working that suits an employee’s needs like having flexible start and finish times, or working from home) was now seen to be ‘normal’. However, panellists felt some employers could do more to implement flexible working practices. New technology was seen as a key driver of the shift to flexible working, but needed to be supported by universal broadband access, an issue for some in rural communities. And panellists thought the Covid-19 outbreak could accelerate the shift towards more flexible working models or promote new ways of working. For example, empty retail units from failed businesses could be re-purposed into localised office spaces to reduce commuting. Many panel members predicted their own working practices would change permanently.

Flexible working was generally viewed positively and was thought to have helped keep some people in the labour market longer and bring others (especially women) back into work. However, some felt there was still insufficient flexibility, with employers paying lip service to the issue, and this was a barrier to some re-joining the workforce.

There were also concerns, especially in London, that work-life balance was becoming harder to achieve with technology making it harder to ‘switch off’. Some felt employers’ expectations were too high for what workers could deliver and there was a perception that many were working harder and longer for less. Panellists felt this, as well as a generally more uncertain labour market, was impacting wellbeing and mental health.

Graduate and entry level jobs were seen as highly competitive and many thought there were limited opportunities to gain work experience. Many found employers require experience as well as academic qualifications and the rise of the ‘unpaid internship’ was thought to be creating social mobility barriers.

‘Jobs for life’ were seen to be a ‘thing of the past’. There was a general view amongst panellists that there had been a shift from ‘careers’ to ‘jobs’ with people moving companies more frequently than in the past. The perceived historical stigma of frequently changing jobs was thought to have gone and moving every few years was perceived as ‘normal’. Some saw this positively, creating a dynamic workforce with opportunity to build skills and broaden experience. Indeed, many younger panel members were happy with moving companies. Others were worried that it was reducing employee engagement. Other perceived consequences were a lack of clear career paths and less loyalty (both from the employer and employee).

The shifting balance of power and the deterioration in the relationship between employee and employer was thought to be driving a lack of investment in staff in some cases (eg training). Some thought employers saw staff as disposable and that, along with the risk of staff leaving, was reducing incentives to invest in training.

There was perceived to be a ‘national skills shortage’. Many felt the current education system and training fails to equip young people for the changing world of work. Panellists thought there should be more focus on high-tech qualifications (eg coding skills) to prepare the future work force for the digital world. Panellists also felt better careers advice was needed to address the mismatch between the work people want to do and the jobs available.

The skills gap was expected to get worse as automation and developments in artificial intelligence (AI) would likely put low-skilled workers at risk of redundancy. Several panels discussed this challenge and the need to retrain these workers.

Many panellists thought the Covid-19 epidemic highlighted that many important jobs are often undervalued and poorly remunerated, for example nurses. Some panellists hoped it would trigger a fairer reward for ‘key workers’ on the ‘front line’, as well as a broader redistribution of wealth.

Some were concerned that Brexit would create skills shortages and reduce labour supply. Others were worried about the impact leaving the EU would have on workers’ rights. There were anecdotes of European workers who had already left the UK and others who were planning to leave. Some areas already saw a ‘tight labour market’ where employers were struggling to fill roles. This risk was felt to be particularly acute for the NHS where the perception was there were already significant shortages. And the Covid-19 epidemic could exacerbate this even further. In Scotland there was a feeling that there were not enough people to fill the jobs, possible evidence of the impact of labour mobility constraints.

Labour mobility was thought to have fallen as people are either unable or unwilling to move roles. The high cost of housing was seen as a barrier to moving to the South East (where panellists felt most opportunities are), meaning geographical mobility is restricted. And locally, poor transport infrastructure was limiting how far people were willing or able to commute. Many did not feel confident about changing jobs given the uncertainty in the labour market and the potential for post-Brexit job cuts and the impact of Covid-19. And many panellists felt the threat of redundancy was high, even prior to Covid-19.

Unemployment was expected to go up across the country as a result of Covid-19. The online surveys showed a marked deterioration in employment prospects (Spotlight: Evidence from the online surveys). And there were concerns that even those that were given a leave of absence at 80% pay might struggle to get by with a reduced income.

Panellists also felt that many people would like to work more than they currently do. This was another reason why panellists doubted the employment statistics. Panellists felt there were some people still outside the labour force, classed as inactive, who would like to work but are currently reporting they are unable to look for work.^{footnote [21]} For example, in Northern Ireland, unemployment is low (2.6%) but there is a high level of economic inactivity (26% for 16-64 year olds). There were also thought to be many underemployed people, working in lower skilled roles or with fewer hours and less pay than they would like because ‘a job is better than no job’. This ‘hidden slack’ was one reason people thought wage growth might be low.

Panellists thought wages had stagnated. Many thought wages had still not recovered to pre-crisis levels following years of ‘no pay rises’. While some felt there needed to be a period of catch up, few at the panel events expected any material wage growth (Chart 3). Many thought the only way to get a significant pay rise was to change job or go for promotion. This partly stemmed from a view that employees now need to prove they are adding more value as ‘automatic pay rises are a thing of the past’.

In industries with perceived skill shortages, pay rises were seen to be more likely. For example, in London panellists noted that software and IT roles were commanding substantial pay increases. However, these views were expressed prior to the Covid-19 epidemic.

Chart 3: Most people expected their pay to remain about the same or increase a little ^(a)(b)

Footnotes

• (a) Question: How are you expecting your take-home pay to change over the next year?
• (b) Results from 183 responses from polls taken at nine panel events between October 2019 and February 2020

Panellists perceived a lack of well-paid jobs in the UK and thought the living wage needed to increase to tackle the growing problem of ‘in-work poverty’. Some commented that taxpayers seem to be subsidising employers who pay low wages, via support like Universal Credit. Panellists noted that Universal Credit was difficult to understand and involved a long, drawn out process. The Covid-19 crisis was thought to be highlighting some of the issues with Universal Credit, such as the delay in payment. And some thought there was a risk of excluding those without internet access because the forms are online.

Panellists acknowledged that increasing the National Living Wage would put pressure on small businesses. The change in pension rules, where all employers have to provide a pension scheme for employees and make a minimum contributions on their behalf, was already thought to be affecting costs for businesses. Some felt an increase in wages would put additional pressure on costs. And these higher costs would be passed onto consumers via higher prices. Higher inflation could therefore offset any benefit from increasing wages. However, many saw this as a moral rather than economic issue.

There was widespread concern about pension provision and the impact this was having on the labour market. There was a perception that some pension schemes were in deficit and this was felt to be a consequence of low interest rates, which some thought had ‘destroyed the workplace pension’. Panellists felt uncertain about how much of a private pension they would actually get and some were working, or expecting to work, longer than originally planned. Several retired panel members were working part time to ‘top up’ their pension income. Others, who did not have a private pension, viewed their house as their pension.

A regular theme was the rise in the state pension age. Many female panel members who had been affected by the rise in the state pension age were angry about the decision and frustrated by what they felt had been poor communications. The increasing number of men and women having to work longer was also thought to be restricting opportunities for younger people. One suggestion was to encourage people towards a part-time retirement plan, where you could draw part of your pension while working part-time.

Reflections and next steps

The citizens’ panels have been a really valuable innovation. It was great to have such a diverse mix of people come together across the UK to discuss such a broad range of topics. Many of the issues and themes highlighted ring true with what we hear in our day-to-day work. It is important to draw attention to these matters. We hope this report will succeed in doing that and, hopefully, spark conversations about solutions to some of the challenges that have been highlighted.

We, and the Bank, are aware of some of the limitations of the citizens’ panels. For example, while it has been appropriate to keep numbers of participants small, this has limited the reach of the initiative. It also meant that some groups in society were slightly underrepresented, albeit other initiatives such as the Bank’s community forums and youth forum go some way to addressing this. Even so, the Bank is considering how it can increase and broaden participation while maintaining the quality of conversations as the citizens’ panels move forward.

The immediate future of the citizens’ panels will depend on Covid-19. The Bank – and all of us – must ensure that, first and foremost, the public is safe. In light of the ongoing social distancing measures in place at the time of writing, there are no further face-to-face citizens’ panels scheduled at the moment.

During these unusual and uncertain times it is important that the Bank continues to listen to those it serves. For now, the Bank will keep the conversation going via its online citizens’ panel community. It is hoped that face-to-face regional events will begin again once it is safe to do so.

We look forward to continuing our partnership with the Bank in this valuable initiative and ensuring that the voices of the public it serves are heard and reflected in its work.