The coalition’s cost of living sleight of hand

The transparent attempt by the government to selectively reinterpret the data so as to downplay the so-called 'cost of living crisis' is frankly rather alarming.

The coalition is being rather disingenuous, aren’t they?

Splashed across several of the newspapers this morning was the extraordinary claim, emanating from government, that living standards, employment and pay are all rising as economic recovery takes hold.

“Official analysis showed that wages rose faster than inflation for 90 per cent of people last year,” as the Daily Mail put it.

The economy has certainly returned to growth recently after three years of stagnation, but are living standards really on the rise?

No, is the short answer.

Firstly, the data the government has used for their claim is highly selective, as some commentators have pointed out. It excludes mortgage interest payments, which are a huge added cost for some families, especially in the south east of England, and fails to take changes to the benefits system into account, which include changes to in-work benefits, tax credits and child benefit.

According to the Institute for Fiscal Studies (IFS), it’s those on low incomes who are now feeling the squeeze because of changes to social security payments and who will continue to be the hardest hit as benefit reforms take effect in the next few years. There is a plethora of anecdotal evidence suggesting as much this already: half a million people received three days emergency food assistance from a Trussell Trust food bank between April and December 2013, for example.

The Annual Survey of Hours and Earnings (ASHE), which is what the government is basing its calculations on, also excludes those who are self-employed in its calculation, and they make up 14 per cent (and growing) of the workforce.

And finally, as the economist Jonathan Portes has pointed out, coalition calculations are also based on weekly rather than annual earnings – whereas tax liabilities are calculated annually. They aren’t comparing like with like.

In summary, the latest Office for National Statistics (ONS) figures showing that total pay growth is still just 0.9 per cent – half the level of inflation which is 2 per cent – are still the best figures to go by.

Inflation 3-JPEG

As Paul Johnson, director of the IFS, put it on the Today programme earlier this morning:

“If you’re looking at the whole of household income, a lot of this information is a little bit out of date. We’ve done our own work looking at where we think things will be going and it does look pretty clear that, as I said, by 2015 incomes won’t have recovered their 2010 or 2008 levels.”

The transparent attempt by the government to selectively reinterpret the data in order to downplay the so-called ‘cost of living crisis’ is frankly rather alarming.

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10 Responses to “The coalition’s cost of living sleight of hand”

  1. Selohesra

    I think it would be truely astonishing if we were now better off that 2008 or 2010 – the depth and damage of Labour’s recession was enourmous and will take a lot of pain from everyone to repair. Fortunately it sdeems that we have just started on a recovery – but a long way to go

  2. blarg1987

    Just to correct your point it was not Labours recession but a recession of Conservative and New Labour policies over several decades. Both parties put in policies that contributed to the recession so both are culpable.

  3. Rich

    I’m your average run of the mill bloke, I work as a cover teacher in a very large school in the North of England. I’ve worked all my life and paid taxes for the last 30 years. I’ve been prudent throughout my life and up till now Ive never owed anyone anything EVER, no over draught, no credit cards, no loans!
    I now have almost £2,000 of rent arrears and my landlord has served an order seeking posession of my home, I’ve never felt so desperate as I do now!

    I’m classed as ‘Working Poor’, I do have to choose between heating and eating, I have a disabled daughter and the care I can give her has been squeezed so much I’m struggling, ATOS have hounded us relentlessly!
    My older children have moved out of our family home of 22 years and I’m now subject to the insidious Bedroom Tax.

    I do not see a way out of my situation, there’s no more money and none on the horizon.

    How on earth have these Eton buffoons come to the conclusion that people like me are better off?

    How dare they preach these blatant lies and what can people like me do about it!

  4. Sparky

    Prove it.

  5. blarg1987

    Well it was a Conservative Goverment that allowed de regulation of the city, encouraging large risk taking and relaxing or repealing many laws that were put in place following the crash in 29. This encouraged many building socities to become banks,
    New Labour when it came to power did not reinstate any of the laws that were repealed and the Conservatives in opposition demanded even more deregulation of the banking system.
    This all came to a crunch in 07 with the financial crisis with many of the building socities that turned into banks (following deregulation of the Conservative Goverment) going bust due to risk taking and not hiolding enough capital which neither party ensured there was a regulaton for when in power or push for a regulation when in opposition.

    And your prove to the contrary is?

  6. nodbod

    I am a bit more fortunate than you. However, in a nutshell, since 2008 I have had a 1% pay rise and this year (yes,I do mean 2014) I have been notified that my pay rise is 0.5%. The first two digits on my take home pay have not altered and the third digit has gone up less than five in that same time. I do not qualify for any benefits, nor does my wife. Because of restructuring, outsourcing, etc, my wife’s salary has actually fallen. Please realise that none of my wife’s travails have been at her instigation but her take home pay has very nearly halved in that time.

    Now my water (I have been put on to a metered supply) has almost doubled, my power and gas have risen by 9%. My council tax has risen. My food bills escalate, it seems, on a weekly basis.

    David Camoron now states that I am better off! What maths system is he using? Do they teach different maths at Eton? I feel that I am a fairly typical person and part of a fairly typical family group. My guess is that you feel the same and yet we are both considerably worse off than we were. I did not cause the crisis. You did not cause the crisis. Yet you are having trouble even exisiting and my standards have been drastically diminished. However the sales of luxury cars and holidays continues unabated. Indeed I read that the luxuries markets have never had it so good. Funny how the people who caused the crisis sail on regardless but every other sucker is suffering.

    I hope that things get better for you. My guess is that we may both be better off shortly as there is an election coming up but do not be fooled; if they are voted back in we will suffer again so that the already rich may become yet richer.

  7. treborc1

    I worked for 32 years never owned a penny worked hard, never had a holiday paid my way lived ok , made one mistake at work and ended up in hospital for eighteen months, They rebuilt my spine and tried to repair the damage to my spinal cord, sadly I got MRSA due to our beloved Blair cleaners and have now had one massive fight with ATOS to win a battle over my disablity. I’m paraplegic due to the good work of the NHS because it did look for a while as if I was going to be dead from the neck down.

    And the fact is today if I vote Tory I will gain F8ck all because Labour will hold down my benefits rise so will the Tories.

    The fact is today we have three political parties chasing the same group of voters.

  8. treborc1

    Spot on and that’s it in a nutshell and today labour only real idea is to up the top tax to 50p and keep the lowest paid down at the bottom.

  9. blarg1987

    The sad truth is that the reason they are chasing the same griup of voters is because most people do not vote, mainly because they believe all political parties are the same, hence a spiral.

    What we need to do is encourage more people to vote then it will create a wider political spectrum that will make it problamatic for the big political parties to be simular. They will either have to change to get the most votes, or still to the values they believe in and be part of a coalition goverment.

    thats my view anyway.

  10. guest

    Well said, blarg1987.

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