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Tax changes protected incomes during the recession

Most people hardly felt the impact of the recession on their spending power as tax cuts meant average disposable incomes remained the same, official stats show.

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by Deborah Hyde on Aug 10, 2010 at 15:30

Government measures to protect us from the worst of the downturn meant those people lucky enough to keep their jobs saw little change in the cash they had available to spend.

Adjusted for inflation, average household disposable income between 2007/8 and 2008/9 showed 'no significant change', according to research by the Office of National Statistics

Even the fact that many people agreed to work shorter hours, to take unpaid holiday or accepted a wage freeze was offset by lower taxes, the report found.

The data shows that income fell on average by 2% although that was offset by a fall in income tax payments, falls in stamp duty and the cut in VAT from December 2008. As a result average annual disposable incomes rose £65 to £26,899.

But while the headline figure suggests the government did what was needed to help people weather the storm, the detailed numbers show not everyone was so lucky.

Those that lost their jobs or were forced to move into part-time work did lose out. The North East - where unemployment rose the most - was particularly badly hit by the recession.

The data shows a large gap between the average household income in the North East where disposable income fell 11% and Scotland where average income rose 8%.

There was also a marked disparity between the experience of the households where the breadwinner was under 35 and families where the main income earner was aged between 35 and 54.

'Disposable income for all age groups was either the same or changed by no more than 3%. The exception was for those aged 25-34 who experienced a fall of 6%,' the ONS said.

And even for those people spared from the recession the downturn called an abrupt halt to the steady increase in disposable income they had become accustomed to in the years before the recession.

In the four years before the recession, incomes had risen more than 7%, the ONS data shows.

While the data shows most people survived the recession intact, the real impact is yet to be felt as the tax benefits are now a thing of the past, VAT is set to rise and the real effect of the recession on life-long earnings and savings won't be known for years to come.

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8 comments so far. Why not have your say?

No doubt Scotland fared well because of all the public sector wages and tax reductions. The sooner the English pull the plug on their subsidies the better. Make them work for a living.

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The scots have done so well with Gordon Brown, Tony Blair, Alisdair Darling all being scots and doing what they could for the scottish. We should have let them go their own way as soon as RBS failed instead of bailing them out.

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oh yes colloden weighs heavily in the previuos govs mind.

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Could Scotland not claim territorial rights to the North Sea if they were to 'go thier seperate ways'? If so, this would certainly be a bad thing

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How dare you Mr Greenland and Anom 1 and Anom 2 berate Scotland in such a way and tell us to work for a living!! And what makes you think the Scots 'had it so good' under the Gordon Brown government? My husband would love to be working again but can't get a job. I am 64, still working full-time and will probably have to do so for at least another 20-3 years if not longer! And by the way Ms Hyde where did you get the ridiculous notion that average income in Scotland rose 8%? Was this just another number pulled out of the hat? Get real people. Scotland and the people who live here have just the same problems as anywhere and anyone else in the UK in these turbulent times.

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Well said Pamela.

It is all too easy to make simple black and white assumptions from data and information. As an Analyst I should know.

Take the public vs private debate. Lets ignore increases/decreases and look at hard facts. Average take home pay per week for the year June 09 to June 10 (ONS official stats again, not seasonally adjusted for whole economy and including bonuses) Private sector £480, Public £463.2. Pension comparisons need to reflect this i.e. generally smaller pecentage (1/80th) of a smaller salary sum - but yes there remains a better (possibly?) pension guarantee (but for how long) and (lower now) index linking. My personal comparison - I am going on is my relative pensions from Public and Private work and private has won hands down. Now there's a surprise, eh?

But looking to the future all will change!

The Scottish figure for average earnings over the same period falls well below both the UK Private and Public averages at £451 - and that includes the so called 8% rise - so it still has not caught up with the UK mean! Point is you cannot look at different percentages as a comparison unless the denominators are equal. You might see where the wages are rising fastest compared to last year but I do not see many wishing to move jobs to get that faster rising smaller wage!

Lies, damned lies, and journalistic interpretations spring to mind......

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You still can't avoid the fact that the English taxpayer pumps loads of money into Scotland. Some 30% higher than taxpayer money spent in England. You need to get off the milk up there.

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Alekos

Aug 17, 2010 at 13:48

In terms of central funding such as the Barnet formula results you have a point as it is based (perhaps loosely) on need. However that is just a small part of any equation.

There is lots of other government spend -all paid for by the taxpayer - that ought to be counted. Difficult not to mention the perhaps dwindling input from Scottish taxpayer such as the Whisky and Oil/Gas industries that add to the UK prosperity, Government spend such as on the civil service, MOD, defence support establishments, Agencies (like DVLA) huge subsidies (still?) for rail travellers (mainly in England) and spend on infrastructure etc. (Motorways, rail, UK Central Government offices tend to be based and the money spent (not just biased against Scotland) but mainly in the deep South! Most outside the SE spend tends to be when it is not convenient to have the establishment near the home counties or token devolved activities (DVLA a good example).

Come now support your case, Mike. Produce all the costings for these and then lets see where our (UK taxpayer) money goes!

Don't be biased with 'get off the milk' comments. All taxpayers pump money into lots of activities and locations. You're not seriously suggestiing that Scotland gets 30% more spend than England, it's much bigger (x 10 in population) neighbour? Tell us all what this 'out of proportion' spend is for!

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