UK disposable incomes fell in first three years of coalition government, says ONS
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Version 0 of 1. British household spending power fell in the first three years of the coalition government despite millions of people being taken out of the lowest income tax band, according to a report by the Office for National Statistics. Year-on-year rises in the personal income tax threshold, which cost the Treasury billions of pounds in lost revenue, were unable to protect households from an economic downturn marked by pay freezes and rising energy bills. The ONS said restrictions on council tax rises were also taken into account as part of its measure of real household disposable income (RHDI), but those constraints only served to prevent an even bigger fall in disposable incomes. Between 1997 and 2007, disposable incomes were on an upward path before declining from 2010 onwards, the ONS said. The ONS findings will feed into the heated debate about the decline of British workers’ pay in the runup to the general election in May. Related: David Cameron urges business leaders to offer pay rises in bid to thwart Labour David Cameron urged employers this week to improve living standards through wage rises and allow workers to share the benefits of the UK’s recent GDP growth spurt. The prime minister was answering months of criticism from Labour that the government has presided over a long period of declining real incomes. In 2010, the government raised the personal tax allowance to maintain the living standards of workers, many of them hit by pay freezes and rising fuel costs. By 2013, the coalition had raised the point at which workers started to pay tax from £6,475 to £8,105 – it has since passed £10,000. Treasury estimates show that after this April, the higher personal threshold will be worth £800 a year to a typical basic-rate taxpayer and will have taken more than three million people out of income tax altogether. Ministers have also capped council tax, with most local authorities freezing payments during this period. The ONS said that even taking these tax cuts into account, household disposable incomes had fallen to £16,900 by the end of 2013 after reaching a peak of £17,300 in 2010. Stripping out the effects of tax giveaways, the situation for the average worker is even worse and show how households have suffered a lost decade of declining spending power. John Philpott, director of the Jobs Economist consultancy, said: “The coalition government will hope nobody looks at the figures too closely. If there ever has been a genuine ‘long-term economic plan’ it has hit rather than helped real household incomes. These took a dive as soon as George Osborne became chancellor and arenow only improving because of a fortunate fall in inflation for which he can take no credit.” The ONS said from 2001 household spending was on an upward trajectory that stalled in 2006. From this peak it began a precipitous fall that took the level back to levels not seen for at least 13 years. According to the report the average household in 2001 was spending £10 a week more than its equivalent in 2013. The report said: “UK households spent £517.30 on average per week in 2013. However, when taking inflation into account, average spending has actually decreased since 2006 – when households spent £539.80.” Household wealth, aggregated across all households in Great Britain, jumped between 2010 and 2012 to £9.5tn, compared with £9tn in 2010 and £8.4tn in 2006. The ONS said the largest elements were private pension wealth (38%) and net property wealth (37%). The bottom 50% of households could lay claim to only 9% of the total, compared with the 44% of the total claimed by the top 10% of households. Nevertheless, some wealth is widely held with half of all households able to claim net household wealth of £218,400 or more. |