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Osborne fiddles the figures – again – on living standards

In a budget speech spent firefighting against his opponents’ attacks, Osborne’s most eye-catching claim was that household incomes are now higher in 2015 than in 2010. However like everything else this slippery chancellor does, nothing should be taken at face value. And once again the spin he has put on the facts is wildly misleading. He chose as his measure ‘real household disposable income per capita’ which he said is expected to show at the end of 2015 a marginally higher level than in 2010. Apart from the fact that it is a forecast, not a fact, the real question is whether it is the right metric for measuring living standards in the first place. It is badly flawed because it includes items that people wouldn’t consider as income at all such as ‘imputed rents’ (i.e. the rent that homeowners might receive if they did not live in their own home!). It also includes, bizarrely, the incomes of charities, universities and trade unions!

A much more reliable source of the objective truth is provided by the various think-tanks. The Resolution Foundation’s analysis indicates that average incomes remain around 4% below their pre-crisis peak and are still some way below their 2010 level. The Institute for Fiscal Studies finds that incomes in this fiscal year 2014-15 are still more than 2% below their 2009-10 level. The Office for Budget Responsibility’s analysis shows that the growth of income per head, another proxy for living standards, has been far weaker since the recession than after previous downturns. Another metric – median net household income adjusted by CPI inflation – shows household incomes still 6% below their 2008-9 level.

So much for the statistics. But the key is what people feel about their living standards rather than what the chancellor wants them to believe 6 weeks before an election. Paul Johnson, director of the IFS, has commented that “we are for sure much worse off than we could reasonably have expected to be back in 2007 or in 2010″. On that count average household incomes grew by just 1.8% between 2011-14, and that compares with the early 1980s and 1990s recessions when incomes grew by 9.2% and 5.1% respectively.

There are other important points. One is that whether the change in household incomes since 2010 is just squeaking over the line by 0.5% or still below the line by 0.5%, it’s still an utterly miserable economic record over 5 years. Another is that a median conceals a huge amount of variation on either side of this average measure. Half the population are well below this median level, victimised by very low pay, benefit cuts, sanctioning and dependence on food banks, and now threatened by Osborne’s further £12bn benefit cuts in the next parliament. People at the top of the other half have never really noticed the recession at all. The likes of Sir Martin Sorrell are being paid £10m-plus (£192,308 a week) while the UK average is £22,000 (£423 a week), and the High Pay Centre has just found that at some FTSE-100 companies the ratio of chief executive pay to average pay is in excess of 400 to 1.

One Comment

  1. Barry Ewart says:

    IF YOU VOTE TORY YOU ARE VOTING TO ALLOW FRACKING UNDER YOUR HOUSE!
    IF THE TORIES GET IN THEY WILL CHARGE YOU £15 TO SEE YOUR GP!

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