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We’re all now better off? There are lies, damned lies and Tory reassurances

Osborne Liar LiarThere are lies, damned lies and Tory reassurances. The latest yanking of the figures to pretend what nobody believes is a classic. Select the numerical series that suit you, make some amendments to it that help your case but ignore others that don’t, pick the definitions of income and inflation that give the results you want, muddle the timescales of evidence to give the impression that the conclusions apply now, and hey presto reality is rewritten just as you would have wished. But as anyone in the street will tell you, the truth if very different.

The government story that things are improving because we are now (marginally) better off than a year ago is flawed on several grounds. The figures are derived from the Annual Survey of Hours and Earnings (ASHE) which is collected by government from companies’ pay to a sample of 1 in 100 employees. The government then adjusted these statistics of gross pay by applying income tax and national insurance (because tax relief has been increased) to translate them into net pay, but somehow forgot to include the other changes that have been made in net pay by tax credit and child benefit reductions which spoil the government’s case by showing that people continue in this year, as in the previous 3 years, to be worse off.

There are other weaknesses with the ASHE figures. One is that it only measures the income of employees, not of the 14% who are self-employed, and if the latter were included it would almost certainly show that the decline in incomes was even bigger. Another is that the government massaged the ASHE figures by focusing on the pay of those who have been in employment for more than a year, thus excluding lower-paid people moving to jobs with fewer hours or lower pay, and if they had been included the results would have been worse still for the government’s contention. A third caveat is that the government continues to use CPI (consumer price index) which excludes housing costs (particularly rising rents) rather than RPI (retail price index), and again if the latter were used the results would disabuse the government case even further.

But the most important point of all is that the government have selected ASHE to get the result they wanted, and have blithely ignored two other official indices of incomes which tell a completely different story. The AWE (Average Weekly Earnings) series comes from a survey of every big employer and a sample of smaller ones. Its latest figures from the year to November 2013 (later than the ASHE figures which only relate to the year to April 2013) show gross wages rose just 0.7% while inflation was 2.1%, a decline in real income of 1.4%. The other official source HBAC (Households Below Average Income) takes into account all the the factors that affect people’s incomes. It shows that the median household’s drop in real income has now reached 6% since 2009-10 and is now stuck at the lowest level in a decade. QED.

What this latest government escapade does however show beyond any doubt is how desperate they are, by hook or by crook, to counter Labour’s cost of living crisis and if that requires misrepresentation, massaging or downright fiddles, then so be it.

Image credit: Captain Ska video: Liar, Liar (still)

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