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Monday, 21 May, 2001, 10:47 GMT
Are we any better off?

How have households and individuals fared under a Labour government?


The two main parties make very conflicting claims - with Labour claiming that the average family is 370 better off, while the Conservatives say that every man, woman and child in the country is paying 500 more in tax.

Of course, these two statements are not incompatible.

The strong economic growth of the past few years has raised average household incomes, even if more of it is going to the government.

Average incomes are up around 10% under Labour - although the average yearly rise is less than under Mrs Thatcher.

Lower interest rates have also benefited those households (about 40%) with a mortgage - although interest rates are more or less where they started over the life of this government.

So should we give the Chancellor the credit for the UK's recent economic growth record - which began before he took office, but has continued at a steady pace?

Or should we take more account of the fact that taxes have risen faster than public spending in the last four years?

As far as individual households are concerned, official figures show that the average household had a gross income of nearly 480 per week (about 24,000 a year) in 1999-2000, the most recent year for which data are available.

That is an increase of 14% in real terms over the past four years, when the average household income was 420 a week.

Taking into account direct tax payments, the disposable income of the average household in 1999-2000 was 390 per week (20,000 annually) - an average tax rate of just over 18%.


But averages can also be misleading.

People who are not in work may have had a very different experience from those in the labour market.

In fact, inequality is thought to have widened or stayed the same in the first few years of the Labour government, with the income of the richest growing faster than the income of the poorest.

That is because the income of the poor largely comes from social security benefits, which rise in line with inflation, and thus at a slower rate than average earnings.

In 1999-2000 the poorest 20% of households received on average benefit payments of 96 per week (or 5000 per year), of which nearly four-fifths came from social security and other benefit payments.

The richest 20% had average incomes of 1,145 per week (or nearly 60,000 each year), nearly twelve times as much.

Of course, their disposable income is reduced by tax payments - but even after this, the richest 20% had a disposable income of 882 per week (45,000 per year), or nine times the income of the poorest 20%.

The middle 20% of the population had an average disposable income of 315 per week, or 16,000 per year, after tax. They paid 15% of their gross income in tax.

Some of the new measures introduced by Labour, such as the working families tax credit, and the minimum wage, may have shifted the balance slightly - but they are not measured in the most recent set of figures available.


There are also significant regional disparities in household incomes which have not changed much over the past few years.

Households in London are the richest, with average incomes 20% higher than the average at 570 per week (28,000 per year).

The poorest regions are Northern Ireland, Wales and the North East, where household income is some 25% below the average.

Incomes in Scotland and Yorkshire are also significantly below average.

Not surprisingly, the region with the lowest income (Northern Ireland) also showed the highest proportion of total income derived from social security benefits (20%, compared to 12% for the UK as a whole).


Wealth is more unevenly distributed than income in the UK, and that inequality has been increasing in recent years.

In 1976, the richest 5% of the population owned 38% of the country's marketable wealth - that is, assets like stocks and houses that could be sold for cash.

Then, the richest 10% owned 50% of all wealth, while the poorest 50% only owned 8% of all wealth.

Two decades later, in 1998, the latest year for which figures are available, there was little change: the richest 10% owned 56% of all wealth, and the poorest 50% only 6%.

That meant that the top 2.4m households own assets worth about 1,300bn, while the bottom 12m households own assets of 150m.

Other figures show that 28% of households have no savings - something that has concerned all parties - and 50% have saved under 1,500.

Almost one in 10 households have no bank account.

The increase in the wealth of the richest groups is largely due to the rise in the stock market.

Deducting the value of housing, the top 10% own an even larger 65% of total wealth.


A more sophisticated view of our standard of living would also have to take account of the value of the goods and services we now buy.

For example, the number of households owning computers has gone up in the past four years from 27% to 38%.

And the numbers owning mobile phones has increased from 16% in 1996-97 to about 50% in 2000.

Yet many of these goods have become cheaper and at the same time available with more and better features, so that people with the same level of income are able to afford a better product.

There is also the question of standards of the "public goods" we buy indirectly through our tax payments, like health and education.

If these have gone up, then again we are "buying" more for the same money - and if good public services are more widely available across different regions and income groups, then this might have compensated for the growing inequality in household incomes.

And that would compensate us for the higher taxes we have paid.

As our standard of living has gone up, we have switched to buying different sorts of products, now spending twice as much for example on transport and leisure activities rather than food and drink.


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