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exiges

Household Incomes In Uk 'may Return To 2005 Levels'

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http://www.bbc.co.uk/news/business-13384857

Households in the UK may be facing the biggest drop in income for 30 years, a leading economic think tank has warned.

The Institute for Fiscal Studies said median take-home incomes had actually increased during the recent recession.

But the institute's analysis of latest government figures suggested it was "entirely possible" that median incomes dropped by 3% in 2010-11.

The policy group said such a fall would leave median income levels back where they were in 2005.

'Pain delayed'

According to the Institute for Fiscal Studies (IFS) the squeeze from the recession on household incomes in the UK is only now being felt.

While new data shows average incomes rising faster than inflation in 2008-10, it says in the 2010-11 fiscal year they may have undershot.

The IFS also said child poverty had fallen but not by enough to meet the old Labour government's target.

Tony Blair's government said it would halve child poverty by 2010, but the IFS said that it would only have fallen by a quarter.

IFS research economist Wenchao Jin said: "The figures tell a story of pain delayed, but not pain avoided.

"Average living standards rose over the recent recession, likely to be driven by large increases in benefits and tax credit rates.

"However, this type of growth cannot be sustained in the long term, and the outlook for incomes in 2010-11 is considerably bleaker, with the long-term effects of the recession on living standards delayed rather than avoided."

Lagging benefits

The data, from the Department for Work and Pensions, showed median incomes rose 1% above the rate of inflation in 2009-10, after also having risen above inflation the previous fiscal year.

The IFS attributed a large part of this "surprising" result to the way in which benefits are calculated.

Benefits are indexed to inflation with a lag of several months.

As inflation fell during the recession, it meant that benefits rose each year much faster than the then-current inflation rate.

But during the last fiscal year the effect was reversed - inflation took off rapidly, whereas benefits continued to be indexed to the earlier, lower inflation rate.

Other data showed that earnings undershot inflation by 3.8% during the first 11 months of the year.

The IFS said that if its forecast of a 3% fall in median incomes in 2010-11 was correct it would be the biggest such fall since 1981 and would bring the median income back down to its level of 2004-05.

In March, a study by the IFS and the BBC said that median incomes in the UK had fallen by 1.6% a year between 2008 and 2011.

Poverty rates

In the new report, the institute also looked at the Labour government's record on reducing poverty in the UK.

Relative poverty rates for the elderly and children did fall during Labour's 13 years in government - thanks largely to benefits rising above the rate of inflation - and are now at their lowest levels since the 1980s.

But among working-age adults without children, poverty has risen to new highs.

It also found that overall income inequality had not improved, remaining near its highest level since records began in the 1960s.

Edited by exiges

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http://www.bbc.co.uk/news/business-13384857

Households in the UK may be facing the biggest drop in income for 30 years, a leading economic think tank has warned.

The Institute for Fiscal Studies said median take-home incomes had actually increased during the recent recession.

But the institute's analysis of latest government figures suggested it was "entirely possible" that median incomes dropped by 3% in 2010-11.

The policy group said such a fall would leave median income levels back where they were in 2005.

'Pain delayed'

According to the Institute for Fiscal Studies (IFS) the squeeze from the recession on household incomes in the UK is only now being felt.

While new data shows average incomes rising faster than inflation in 2008-10, it says in the 2010-11 fiscal year they may have undershot.

The IFS also said child poverty had fallen but not by enough to meet the old Labour government's target.

Tony Blair's government said it would halve child poverty by 2010, but the IFS said that it would only have fallen by a quarter.

IFS research economist Wenchao Jin said: "The figures tell a story of pain delayed, but not pain avoided.

"Average living standards rose over the recent recession, likely to be driven by large increases in benefits and tax credit rates.

"However, this type of growth cannot be sustained in the long term, and the outlook for incomes in 2010-11 is considerably bleaker, with the long-term effects of the recession on living standards delayed rather than avoided."

Lagging benefits

The data, from the Department for Work and Pensions, showed median incomes rose 1% above the rate of inflation in 2009-10, after also having risen above inflation the previous fiscal year.

The IFS attributed a large part of this "surprising" result to the way in which benefits are calculated.

Benefits are indexed to inflation with a lag of several months.

As inflation fell during the recession, it meant that benefits rose each year much faster than the then-current inflation rate.

But during the last fiscal year the effect was reversed - inflation took off rapidly, whereas benefits continued to be indexed to the earlier, lower inflation rate.

Other data showed that earnings undershot inflation by 3.8% during the first 11 months of the year.

The IFS said that if its forecast of a 3% fall in median incomes in 2010-11 was correct it would be the biggest such fall since 1981 and would bring the median income back down to its level of 2004-05.

In March, a study by the IFS and the BBC said that median incomes in the UK had fallen by 1.6% a year between 2008 and 2011.

Poverty rates

In the new report, the institute also looked at the Labour government's record on reducing poverty in the UK.

Relative poverty rates for the elderly and children did fall during Labour's 13 years in government - thanks largely to benefits rising above the rate of inflation - and are now at their lowest levels since the 1980s.

But among working-age adults without children, poverty has risen to new highs.

It also found that overall income inequality had not improved, remaining near its highest level since records began in the 1960s.

and the rest, i reckon UKs real wealth levels are going back to the pre 80s level when the funny money took off towards a monetary moonshoot before this is rebalanced

Edited by georgia o'keeffe

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if you read the comments it is quite clear there are a lot of people out there in a lot of trouble

house prices are clearly now a stack of cards about to collapse, just a matter of time

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From the linked article:

Britons probably suffered the biggest drop in incomes in 30 years over the past 12 months, the Institute for Fiscal Studies said on Friday, leaving median incomes close to levels last seen in 2005. The estimates from the IFS, an independent think tank, echo the message from official statistics released in March, which showed household disposable income in 2010 suffered its biggest fall in real terms since 1977...

"Probably" "estimates"

So it's a guess.

IFS economists said incomes were likely to have fallen 3 percent in the 2010/11 fiscal year, which ended in March, despite a surprise rise from 2008 to 2010. They also warned the long-term effects of the recession on living standards were yet to be felt, as wages failed to keep pace with inflation...

Hang on, inflation?

Ahh. These are "real" incomes, not "nominal" incomes, right?

The rise in average living standards in the immediate aftermath of the global crisis was driven by large increases in benefits and tax credits, which have now been overtaken by inflation consumer price inflation rising towards 5 percent.

Last year, Labour increased benefits by about 2% and they were essentialy frozen this year.

If you are adjusting for inflation, any front loading is going to look like a fall in later years.

Official income data for the last financial year will not be released for another 12 months, but the IFS said earnings -- pay before tax credits, benefits and pensions -- plunged by 3.8 percent in real terms over the first 11 months of 2010/11.

What they don't want to say is that earnings have plunged in nominal terms by less than zero.

That is - they went up.

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Wages up 2%, inflation up 5%, result is 3% less spending power. That's a drag on the economy of 3%, and if the gap persists then the economy will be down 6% next year, 9% the year after etc. Getting wages above inflation (by controlling inflation ideally) is fundamental to growing the economy.

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When a bubble bursts it takes on the characteristic of a deflating object.

This summer might see some seismic shifts going on in the commodities/metals/oil market. :o

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This summer might see some seismic shifts going on in the commodities/metals/oil market. :o

On what basis are you making that assumption?

Since you joined the website in 2005, gold has increased 320%...

I don't see your track record holding much water.

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Wages up 2%, inflation up 5%, result is 3% less spending power. That's a drag on the economy of 3%, and if the gap persists then the economy will be down 6% next year, 9% the year after etc. Getting wages above inflation (by controlling inflation ideally) is fundamental to growing the economy.

Yes, a steady 2% inflation with 2% wage increases would be ideal....but they're not controlling inflation with such low interest rates and exchange rates making imports so expensive, a double whammy with higher commodity costs and countries in other parts of the world increasing their costs to pay their people more...they want what the west have.

...the only winners are the exporters but we now have fewer goods that we make here to sell abroad...we sold many of our assets & industry or closed them down......now we are relying on greater and higher cost imports to survive.

...we wouldn't have been in such a pickle if it had not been for taking on so much consumer and government debt with gay abandon...over ten years of living a false lie, growth built with money we didn't have but have yet to pay for. :huh:

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Wages up 2%, inflation up 5%, result is 3% less spending power. That's a drag on the economy of 3%, and if the gap persists then the economy will be down 6% next year, 9% the year after etc. Getting wages above inflation (by controlling inflation ideally) is fundamental to growing the economy.

If only that was the case . For years we were hovering around the 2% inflation mark ( so they said ) yet every year the Evening Standard did reports saying that it was more like 5 or 6% . So now when they say 5% as they just cannot lie and get away with silly figures like 2 or 3% anymore the real figure must be much higher .

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Wages up 2%, inflation up 5%, result is 3% less spending power. That's a drag on the economy of 3%, and if the gap persists then the economy will be down 6% next year, 9% the year after etc. Getting wages above inflation (by controlling inflation ideally) is fundamental to growing the economy.

Except it is wages up 2%, inflation a lot nearer 15%

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This is what happens when you sell off your capital. You live very well for a few years on the money you got from the sale, then when that runs out you are broke.

Our leaders in government and corporations sold off our birthright that our forefathers had built with their own hands.

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This is what happens when you sell off your capital. You live very well for a few years on the money you got from the sale, then when that runs out you are broke.

Our leaders in government and corporations sold off our birthright that our forefathers had built with their own hands.

+1

With each passing year things look worse.

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Our leaders in government and corporations sold off our birthright that our forefathers had built with their own hands.

The only thing our leaders in government sold is the rights to future taxes - that's what Gilts are. At any time they have the power to revoke that sale.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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