The squeeze on incomes

by Irn Bru Fri Jan 31, 2014 9:12 pm

From The Institute of Fiscal Studies

Summary

Average living standards have fallen dramatically since the recession, as income growth has failed to keep pace with the rate of inflation. Our projections suggest
that real median household income in 2013 – 14 is more than 6% below its pre-crisis
peak. This fall in average incomes has largely been driven by declines in real earnings.

Households have differed in their inflation experiences. On average, low income
households have benefited less from falls in mortgage interest rates and have
been hit harder by high food and energy price inflation than high -income households
.
We estimate that over the period 2008 – 09 to 2013– 14 , the inflation rate for low income households was, on average, 1 percentage point higher per year than that
for high income households
.
As a result , we calculate that the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007 – 08 and 2013 – 14.

The declines in living standards experienced by low and high income households appear very similar once differences in their inflation rates are accounted for
When we assume that the living costs of all households grew in line with the CPI, it
appears that the fall in real income between 2007 – 08 and 2013 – 14 was 6.3
percentage points larger at the 90th percentile of the income distribution than
at the 10th percentile.
However, once the differences in their inflation rates are taken into account, we
estimate that the fall at the 90th percentile was only 0.7 percentage points bigger.

Looking forward, there is little reason to expect a strong recovery in living standards
over the next few years. According to the Office for Budget Responsibility, real
earnings are not expected to return to their 2009 – 10 levels until 2018 – 19. Further
discretionary cuts to benefits and tax credits will put downward pressure on real
incomes, particular ly for low income households. Given this, it seems highly unlikely
that living standards will recover their pre crisis levels by 2015 – 2016.

http://www.ifs.org.uk/budgets/gb2014/gb2014_ch6.pdf

So it's the low paid that are paying the heaviest price for all the cuts. So much for we're all becoming better off and the plan is working. Well it ain't for some.

by ALLAKAKA Fri Jan 31, 2014 9:14 pm

Is the headline in drunken Scots ?

by Guest Fri Jan 31, 2014 9:15 pm

If the decline in high income and low income households are very similar how does that make the low incomes paying the heaviest price?

by Guest Fri Jan 31, 2014 9:17 pm

It's working for them at the top, who didn't need it anyway. Those at the bottom are paying the price. You'd think that those who had enough already would show some compassion about this, and ask the Government to do something. Instead, they bleat on about how high they are taxed and how terrible it is they have to contribute to society.

by Irn Bru Fri Jan 31, 2014 9:18 pm

sphinx wrote:If the decline in high income and low income households are very similar how does that make the low incomes paying the heaviest price?

Did you speed read it

We estimate that over the period 2008 – 09 to 2013– 14 , the inflation rate for low income households was, on average, 1 percentage point higher per year than that
for high income households
.
As a result , we calculate that the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007 – 08 and 2013 – 14.

by Guest Fri Jan 31, 2014 9:29 pm

Irn Bru wrote:
sphinx wrote:If the decline in high income and low income households are very similar how does that make the low incomes paying the heaviest price?

Did you speed read it

We estimate that over the period 2008 – 09 to 2013– 14 , the inflation rate for low income households was, on average, 1 percentage point higher per year than that
for high income households
.
As a result , we calculate that the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007 – 08 and 2013 – 14.

No I focused on the bit that said

The declines in living standards experienced by low and high income households appear very similar once differences in their inflation rates are accounted for

So although their inflation rates were different the effects were similar.

Still we must expect the rich to suffer more than the poor mustn't we? It just is not fair when they suffer the same amount after all.

by Guest Fri Jan 31, 2014 9:30 pm

Perhaps you need to read it again, because I thought that was very clear. And it's certainly not fair when the rich suffer LESS than the poor.

by Irn Bru Fri Jan 31, 2014 9:32 pm

sphinx wrote:
Irn Bru wrote:
sphinx wrote:If the decline in high income and low income households are very similar how does that make the low incomes paying the heaviest price?

Did you speed read it

We estimate that over the period 2008 – 09 to 2013– 14 , the inflation rate for low income households was, on average, 1 percentage point higher per year than that
for high income households
.
As a result , we calculate that the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007 – 08 and 2013 – 14.

No I focused on the bit that said

The declines in living standards experienced by low and high income households appear very similar once differences in their inflation rates are accounted for

So although their inflation rates were different the effects were similar.

Still we must expect the rich to suffer more than the poor mustn't we? It just is not fair when they suffer the same amount after all.

Further discretionary cuts to benefits and tax credits will put downward pressure on real incomes, particular ly for low income households. Given this, it seems highly unlikely that living standards will recover their pre crisis levels by 2015 – 2016.

by Guest Fri Jan 31, 2014 9:38 pm

Irn Bru wrote:
sphinx wrote:

No I focused on the bit that said

The declines in living standards experienced by low and high income households appear very similar once differences in their inflation rates are accounted for

So although their inflation rates were different the effects were similar.

Still we must expect the rich to suffer more than the poor mustn't we? It just is not fair when they suffer the same amount after all.

Further discretionary cuts to benefits and tax credits will put downward pressure on real incomes, particular ly for low income households. Given this, it seems highly unlikely that living standards will recover their pre crisis levels by 2015 – 2016.

So thats about things that have not happened yet.

by Irn Bru Fri Jan 31, 2014 9:39 pm

sphinx wrote:
Irn Bru wrote:
sphinx wrote:

No I focused on the bit that said

The declines in living standards experienced by low and high income households appear very similar once differences in their inflation rates are accounted for

So although their inflation rates were different the effects were similar.

Still we must expect the rich to suffer more than the poor mustn't we? It just is not fair when they suffer the same amount after all.

Further discretionary cuts to benefits and tax credits will put downward pressure on real incomes, particular ly for low income households. Given this, it seems highly unlikely that living standards will recover their pre crisis levels by 2015 – 2016.

So thats about things that have not happened yet.

That's still to come in addition to the low paid suffering the worst of the drop in living standards.

by Guest Fri Jan 31, 2014 9:40 pm

sphinx wrote:
Irn Bru wrote:

Further discretionary cuts to benefits and tax credits will put downward pressure on real incomes, particular ly for low income households. Given this, it seems highly unlikely that living standards will recover their pre crisis levels by 2015 – 2016.

So thats about things that have not happened yet.

That's right, that hasn't happened yet, so we don't know for sure that people won't still be struggling, but this has already happened:

We estimate that over the period 2008 – 09 to 2013– 14 , the inflation rate for low income households was, on average, 1 percentage point higher per year than that
for high income households
.
As a result , we calculate that the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007 – 08 and 2013 – 14.

by Guest Fri Jan 31, 2014 10:05 pm

Irn Bru wrote:
sphinx wrote:

So thats about things that have not happened yet.

That's still to come in addition to the low paid suffering the worst of the drop in living standards.

But you put up a report stating that high and low income suffered the same drop in living standards despite the disparity in inflation.

by Guest Fri Jan 31, 2014 10:06 pm

Sassy wrote:
sphinx wrote:

So thats about things that have not happened yet.

That's right, that hasn't happened yet, so we don't know for sure that people won't still be struggling, but this has already happened:

We estimate that over the period 2008 – 09 to 2013– 14 , the inflation rate for low income households was, on average, 1 percentage point higher per year than that
for high income households
.
As a result , we calculate that the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007 – 08 and 2013 – 14.

Yeah and Labour spent 3 years estimating that the governments austerity measures would not work. Those estimates were wrong.

by Guest Fri Jan 31, 2014 10:07 pm

Oh right, so Sphinx knows more than the people who study it. Makes perfect sense.

by Irn Bru Fri Jan 31, 2014 10:13 pm

sphinx wrote:
Sassy wrote:
sphinx wrote:

So thats about things that have not happened yet.

That's right, that hasn't happened yet, so we don't know for sure that people won't still be struggling, but this has already happened:

We estimate that over the period 2008 – 09 to 2013– 14 , the inflation rate for low income households was, on average, 1 percentage point higher per year than that
for high income households
.
As a result , we calculate that the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007 – 08 and 2013 – 14.

Yeah and Labour spent 3 years estimating that the governments austerity measures would not work. Those estimates were wrong.

This government have missed every fiscal target they set themselves in 2010 meaning they have had to borrow billions more than they planned and the austerity will have to last much longer because of their incompetence and miscalculations. Nearly 4 years now and they want a pat on the back for the misery they have caused in all this. And you say the plan is working - good grief!!!

by Guest Fri Jan 31, 2014 10:19 pm

Irn Bru wrote:
sphinx wrote:

Yeah and Labour spent 3 years estimating that the governments austerity measures would not work. Those estimates were wrong.

This government have missed every fiscal target they set themselves in 2010 meaning they have had to borrow billions more than they planned and the austerity will have to last much longer because of their incompetence and miscalculations. Nearly 4 years now and they want a pat on the back for the misery they have caused in all this. And you say the plan is working - good grief!!!

Yeah they definitely should have done what France did - France are doing so much better than us.

by Clarkson Fri Jan 31, 2014 10:24 pm

Remind me who caused the deficit. Remind me who has tackled it. Do you think that you could have avopided a squeeze. Are you magicians or something?

Obviously not you only know how to tax and spend. We would now be facing a huge deficit and horrendous job losses like France had we chosen the Socialist way.

by Clarkson Fri Jan 31, 2014 10:31 pm

The squeeze on incomes caused by years of Labour profligacy. You forgot to finish the sentence.

You have some front you ruin the economy and then blame the squeeze on someone else.

by Irn Bru Fri Jan 31, 2014 10:34 pm

Clarkson wrote:The squeeze on incomes caused by years of Labour profligacy. You forgot to finish the sentence.

You have some front you ruin the economy and then blame the squeeze on someone else.

Oh yeah....

Speech by David Cameron March 2009
In his address to the British Chambers of Commerce in Birmingham, Mr Cameron said the party would have to make difficult decisions about tax and spending ahead of the next election. He admitted that all parties had signed up to a "cosy economic consensus" that was misguided.

But he also acknowledged that the current difficulties were not caused solely by the actions of the Labour government since 1997 but longer-term weaknesses in the economy.

He added: "It is only about being honest about the past that we can get things right for the future."

Mr Cameron accused the Prime Minister of failing to recognise how deep Britain's economic troubles went or even acknowledging that any of them are "home grown".

"He thinks a fundamentally sound economy has been hit by an external financial juggernaut, that Britain is the innocent victim of a banking crisis that 'came from America', and that all we need to do is apply a few sticking plasters to an otherwise healthy body," Mr Cameron said.

But he added: "If I'm honest, I have to admit that we, the Conservative Party, didn't see this as early as we could have."

In a striking admission, Mr Cameron said not all of the present problems had been created since Labour came to power almost 12 years ago. "If we're honest we must recognise that some of our economic difficulties today relate not only to what has happened in the last ten years, but also to fundamental weaknesses that have been there for decades," he said.

These remarks could upset Tory traditionalists who will see it as a partial apology for Thatcherite policies.

Speech by Mervyn King – Governor of the Bank of England – September 2010
Recent times have indeed been turbulent. After a decade and a half of stability, with rising employment and living standards, came the crisis and recession - the biggest economic upheaval since the Great Depression. Before the crisis, steady growth with low inflation and high employment was in our grasp. We let it slip - we, that is, in the financial sector and as policy-makers - not your members nor the many businesses and organisations around the country which employ them. And although the causes of the crisis may have been rooted in the financial sector, the consequences are affecting everyone, and will continue to do so for years to come.
Thankfully, the costs of the crisis have been smaller than those of the Great Depression. But only because we learnt from that experience. An unprecedented degree of policy stimulus, here and abroad, prevented another world slump. Even so, around a million more people in Britain are out of work than before the crisis. Many, especially the young unemployed, have had their futures blighted.

From the Institute of Fiscal Studies 2010 The public finances: 1997 to 2010
•
Over the first eleven years of Labour government, from 1997 to the eve of the financial crisis in 2007, the UK public finances followed a remarkably similar pattern to the first eleven ears of the previous Conservative government, from 1979 to 1989. The first four saw the public sector move from deficit to surplus, while the following seven saw a move back into the red.
•
By 2007 Labour had reduced public sector borrowing slightly below the level it inherited from the Conservatives. And more of that borrowing was being used to finance investment rather than the day-to-day running costs of the public sector. Labour had also reduced public sector debt below the level it had inherited. As a result the ‘golden rule’ and ‘sustainable investment rule’ that Gordon Brown had committed himself to on becoming Chancellor in 1997 were both met over the economic cycle that he eventually decided had run from 1997–98 to 2006-07

And remember that Cameron and Osborne had pledged to match and increase Labour's public spending plans and deregulate the financial sector. They also called for the government to match the economic model in Ireland. Just as well they weren't in power then - phew!!!

by Sponsored content

The squeeze on incomes

The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes

Re: The squeeze on incomes