Election Brief: Living standards in the UK have fallen

Professor David Gordon discusses coalition arguments relating to living standards, a key aspect of tomorrow’s general election 

A copy of the full Election Brief is available at: <http://www.poverty.ac.uk/editorial/uk-living-standards-pse-election-briefing>

The change in UK living standards is one of the key contested issues in the May 2015 General Election.  The Coalition Government argues that living standards have increased since it came to power in 2010.  The Labour Party and other opposition parties claim that living standards have fallen.

In March 2015, the Chancellor George Osborne presented evidence in his final Budget that living standards have increased.  This evidence is misleading.  Research from a range of reputable academic studies has shown that average income has fallen over the past five years and poverty has increased.

The latest available data clearly show that the living standards of the UK population have fallen, particularly since the April 2013 cuts in Social Security and other austerity measures took effect.  More people in the UK are now in financial difficulties and increasing numbers are unable to afford both the necessities of life (such as two pairs of shoes) and minor luxuries, such as a one week holiday away from home.  Both fuel poverty and utility bill arrears have increased.  These are the stark conclusions from a comparison of the change in UK living standards between 2009 and 2013, based on early release data recently provided by the UK Government to the European Statistical Office (EUROSTAT).

In 2009, 45 per cent of people lived in households which did not have sufficient money to pay an unexpected expense; by 2013 this had increased to almost half (49 per cent) of the UK population (see Table 1).  The figures also show that, for every single indicator of financial difficulty, more people were having problems in 2013 than in 2009.  It is clear that both serious and more minor financial difficulties are increasing amongst the UK population, with over a third of people in 2013 having difficulties in making ends meet and over one in five people finding their housing costs a heavy burden.

Table 1: Financial Difficulties in the UK in 2009 and 2013

2009% 2013%
Cannot pay unexpected expenses 45 49
Difficult to make ends meet 31 35
Housing cost are a heavy burden 17 22
Cannot afford a small amount of money to spend on yourself each week 14 21
In arrears on rent/mortgage, utility bills or HP during the last 12 months 9 13

The data also compares how the richest two-thirds of the UK populations’ standard of living changed between 2009 and 2013 (see Table 2).  The percentage of people who could make ends meet without any difficulties fell from 69 per cent of the UK population to under two thirds (65 per cent).  Only the very richest (those who could make ends meet very easily) saw no perceived fall in their living standards.

Table 2: No difficulties Making Ends Meet in the UK in 2009 and 2013

Ability to make ends meet? 2009% 2013%
Fairly easily 39 36
Easily 19 18
Very easily 11 11
Total – no difficulties 69 65

The Chancellor’s claim that living standards have risen is fallacious as the National Accounts household sector data that he used are primarily a measure of the movement of money not the living standards of households.  Real Household Disposable Income (RHDI) measures the total income of households compared with the rest of the economy.  There is no information about how the total expenditure or income is distributed at the individual or household level.  Thus, if only the richest 1% have a rise in their incomes, this will also increase the average income in the household sector by exactly the same amount as if the increase had been shared equally by everybody.  RHDI cannot provide a good or adequate measure of living standards.  By shifting attention to the Real Household Disposable Income (RHDI) GDP measure, the Coalition Government has obscured the real impact on peoples’ lives of fallen living standards.

There is only one conclusion that can be drawn from the available scientific evidence – the majority of the UK population has suffered from a fall in their living standards during the current government’s term of office. Both the poor and the majority have indeed ‘all been in it together’ – only the richest appear to have escaped.

It is a shame that the Coalition Government was not prepared to release the latest statistical information on living standards to the public before the May 2015 election – fortunately, it has recently become available via the European Union.

Print Friendly, PDF & Email
Be Sociable, Share!