UK living standards: PSE election briefing

Professor David Gordon and PSE team
The majority of the UK population has suffered from a fall in their living standards during the current government’s term of office concludes an analysis of the latest data of official government data released to the European Statistical office.
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 but an analysis of the latest data by the PSE UK research team suggests that this is misleading.
The Department for Work and Pensions had turned down a requests for the early release of living standards data from the 2013/14 Family Resources Survey in order for the results were available prior to the General Election. The government’s Social Mobility and Child Poverty Commission had argued that the release of this data should be brought forward from June as ‘the full impact of fiscal consolidation to date on child poverty will not really begin to be seen in poverty statistics until 2013/14 data is published’. 
However, the UK Government has had to supply this data to the European Statistical Office (EUROSTAT) to allow for statistical comparisons between the UK and other EU countries.  These data have been processed by EUROSTAT so that they can also be directly compared with similar UK standard of living data from 2009 (i.e. the year before the Coalition Government came to power).
Increasing numbers are unable to afford a wide range of items that make up a basic standard of living. Those who cannot afford two pairs of shoes – an item considered to be a necessity by most people – is up from one percent in 2009 to five percent in 2013 while those unable to replace worn out clothes with some new (not all second hand) ones is up from five to twelve percent and those unable to afford to replace broken or worn out furniture up from 24 to 32%. Increasing numbers are also missing out on minor luxuries: those unable to participate in leisure activities such as cinema, sport or concerts is up from 13 to 17% while those who cannot afford one week holiday away from home 37 to 39%.
More people are also experiencing a range of different financial difficulties. For example, in 2009, 45% 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%) of the UK. In addition, the percentage in arrears on rent/mortgage, utility bills or HP during the last 12 months rose from 9% in 2009 to 13% in 2013. For every single indicator of financial difficulty, more people were having problems.
Those having difficulties in making ends meet rose from 31% to 35% while among those who could make ends meet, it was only the very richest (those who could make ends meet very easily) who saw no perceived fall in their living standards.
The Chancellor’s claim that living standards have improved is based on changes in the Real Household Disposable Income (RHDI) per capita measure which forms part of the quarterly National Accounts, produced by the Office for National Statistics (ONS). But these accounts measure economic output and cannot provide a good or adequate measure of living standards. 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.
The PSE briefing concludes that:
‘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.’
Full details of the analysis in the briefing are available in 'UK living standards: election briefing, PSE May 2015' pdf below.

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