Discretionary income takes a battering

Ernst and Young have published a survey of household discretionary income for the UK over recent years. Their definition of this measure of income is the income available for spending after tax contributions and essential monthly household bills and they have found that the average household is now 15 percent worse off than it was five years ago.  It is interesting that we see so many different surveys and alternatives measures of living costs and guides to living standards these days as confidence in the official data such as the CPI have lost credibility and support.

The fixed monthly bills included in the adjustment to find discretionary income include the costs of running a car, mortgage interest payments, pension contributions, utility bills and council tax.

Fixed monthly household costs have soared by nearly 45% during the past five years, to take up 53% of people’s total pay

According to this morning’s Telegraph

“Wages have failed to keep pace with spiralling petrol, gas and electricity bills and taxes, leaving the average family with £155 less to spend at the end of each month compared with 2004.”

Their meausre does not include the cost of the monthly food shop so one might argue that the deterioration in real discretionary spending power would be even greater if this was included in the calculation. Little wonder that there are growing signs of behavioural change among consumers who are now looking for ways of shaving a few pounds off the weekly shop by switching to the discount food retailers such as Aldi and Lidl.

Telegraph report

Daily Mail

Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK [23 May 2012]
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UK Macro: Risks of a Double Dip Recession [12 Sep 2011]
50% tax rates - Chuck it George [7 Sep 2011]
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Unit 1 Micro: FirstBuy, Affordability and Effective Demand in Property [10 Jul 2011]
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