Are we really going to be £900 better off?
Published 4 June 2015 by Hayley Cox
The IFS claims we should be £900 better off – are you feeling it?
Are you feeling a bit better off lately? According to the Institute of Fiscal Studies (IFS) you should be. Their figures show that you should soon be feeling more flush than you did way back in 2009, in pre-recession times. Paul Johnson of the IFS stated that “Average household incomes have just about regained their pre-recession levels. They are finally rising and probably will be higher in 2015 than they were in 2010, and possibly higher than their 2009 peak”. The extra amount that you’re supposed to see is approximately £900, which would be lovely – but will you actually notice anything different in real terms?
Will it make a difference?
According to the ONS Quarterly Inflation Report, average weekly earnings have risen by 2.2% from the start of the year up to March, which is definitely good news. But, this rise will only be felt in the way the IFS are suggesting if the prices of the things we buy on a regular basis drop back to 2009 prices too.
While it’s true that you may now have more income than you did six years ago, the prices of the things you need to live on have also risen over the period in between 2009-15, especially for the essentials like gas, water and electricity. So your disposable income – the bit you have left after all your essentials have been paid – has remained the same, or even worse, dropped a little bit lower in real terms than it was in 2009.
Now the prices of the essentials you need to live on are falling again. The ONS report states that, ‘Household real incomes have been boosted by the fall in food, energy and imported goods prices’, but they have a long way to go to get back to the levels they were in 2009, with one notable exception – petrol. The forecourts are one area where there’s been a considerable fall in price over the last year. So if you are a car user, you will have noticed this in your purse or wallet.
We suppose what we’re trying to say is it’s all a bit swings and roundabouts. Yes, you may have more money in your pocket than you did in 2009, that’s not a lie. But it’s also not the whole story, as you won’t feel it in real terms because the prices of pretty much everything you need to buy to live remain high enough to eat up the extra you’re getting, if you see what we mean. It’s like saying, ‘I have an extra million pounds in my bank account, I’m rich!’ When in fact the whole of that million is already allocated out pay for things, and you’ll not have a penny of it to spend. An extreme example, but we hope it helps make the point.
Of course all these figures are averages too. Not everybody has had a pay rise and if, for example, you don’t drive then you won’t have felt the benefit of fuel prices falling. So, whatever the experts and newspapers say it is very much hit and miss whether or not you are actually better off than you were a few years ago. Why not let us know on our Facebook and Twitter page if you feel better off?