Belfast Telegraph

Thursday 2 October 2014

People 'richer but more unequal'

British households are 'much better off' now than in the late 1970s, economists believe

British households are "much better off" now than they were during the Queen's silver jubilee year despite the "miserable economic climate", according to economists.

National income has fallen further and is recovering more slowly than it did during the recession of the late 1970s, with household incomes dropping by around 7% in real terms over the last three years, the Institute for Fiscal Studies found. But more spending goes on luxuries, the population is better educated and more workers are in white collar jobs, it said.

In a report to coincide with the Diamond Jubilee, the institute looked back to 1977 when the Queen celebrated 25 years on the throne. It found that a quarter of spending then went on food but that has dropped to 15%, increasing disposable income.

Just over half of all households had a car during the silver jubilee while three-quarters of homes now do. The proportion of working age people with a degree has increased eight-fold and there has been a "dramatic rise" in professional and managerial roles, its research found.

IFS director Paul Johnson said: "Economic times are undoubtedly tough today. But it is easy to forget just how much better off we are now than we were just 35 years ago. Average incomes are twice as high now. We are much better educated and we have access to far more in the way of consumer durables.

"It is important sometimes to step back and appreciate just how much things tend to change for the better over time. Annual economic growth of a couple of per cent a year transforms lives over a generation."

Spending patterns for 1977 and 2009-10, the year latest data is available for, show 10% of income now goes on leisure services, up from 5%.

None of the goods used by the Office for National Statistics to compile inflation statistics in 1977, such as cine film, radio licences, party containers of beer, luncheon meat, condensed milk, lard and carpet tiles, are used today. Instead it looks at items such as mobile phones, hair straighteners, low-alcohol lager, chicken nuggets, organic fruit and vegetables and hardwood flooring.

Incomes are twice as high now as in 1977, the report found. Using 2009-10 prices, the research also revealed a significant increase in the net income of pensioner couples, from £239 to £522, and of couples with children, £363 to £781.

But it concedes "not everything is rosy". While all family types have benefited from rising incomes, inequality has increased. Even after tax, the richest 1% now have 9% of all income compared with 3% in 1977, it said.

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