Cheer up, you've never had it so good

Published on Monday 28 January 2008 21:17

WITH spiralling food prices and energy bills, talk of a looming recession, and a credit crunch which means only the most economically attractive can get a mortgage, staying above the poverty line may seem a tough task in today's world.

Weren't things far better in the Fifties, when a few pounds could feed a family for a week, transport costs were at rock bottom and buying a home was an achievable dream even for a teenager?

Well no, it seems, they were not. In fact, according to a new report, we have never had it so good – we just don't appreciate it.

According to the Office of National Statistics (ONS), the average UK household income has increased 40 times since 1957 – but the retail price index, a multiplier of how much the cost of goods has increased – is just 17.

Ed Dunn, author of the study, said: "Incomes have far exceeded the increase in prices. That's reflected in expenditure on pleasure and recreational activities.

"We are looking here at two snapshots of two very different societies. We don't feel it because we compare things today from one week to the next.

"Today, we may see council tax and rates and bills going up from one quarter to the next, but if you compare it to the 1950s, then you do appear to be in a better position and have more to spend on non-essentials. In 1957, they spent most of their income on absolute necessities."

In 1957 the biggest drain on the weekly income was food. It is now housing – whether rents or mortgage payments.

And in real terms, housing costs, including mortgage interest payments, have gone up 44-fold – and spending on housing has gone up 69 times.

This may be down to the fact that in 1957, owner-occupation was at about 30 per cent and in 2005 – the latest year for figures – it was at 70 per cent.

Professor Cary Cooper, a psychologist, said the reasons for the deficit between what we have and what we perceive we have differed between generations.

People aged 25-35 see themselves as badly off because although they have high disposable incomes, the property market means they cannot buy a house.

He said: "What they do is they use (their disposable income] for temporary gratification – by drinking and having good holidays.

"They have money but they are spending it in a way that makes them not feel so well off. I think that's the real problem we have in society."

For the older generations – and indeed for high flyers in their 20s – the dissatisfaction stems from a loss of the community spirit that was such a part of 1950s living.

Then, UK households could expect to make 16 a week, compared with 642 today. Total expenditure has gone up 32 times, from 14 to 456.

And today, only 42 per cent goes on the essentials, compared with about 58 per cent in 1957 – leaving a much larger proportion of disposable cash.

But today's high incomes have not come cheap, paid for with long hours in offices far from home. There is not the same sense of community as in the 1950s, when people lived and worked in the same place they were born.

Prof Cooper, of Lancaster University, said: "We are earning more money. Our disposable income is higher. Our taxes are lower. But we have had to be extremely competitive, which means companies had to become mean and lean. That means they have to have fewer people to do the same amount of work.

"They may have the money, but where is their disposable personal time?"

He said that once a minimum threshold of earning was achieved, perceived quality of life was no longer linked to income.

However, Professor Donald MacRae, chief economist at Lloyds TSB Scotland, disagreed with the idea that we believe living standards have slumped – and he suggested there was more leisure time available.

He said: "I am not sure we think we are worse off. When I was a boy we had no central heating and one coal fire. I had an uncle who lit his house with oil lamps."

He said society had become more efficient – people wasted less time getting to their destination and so had more free time.

"If you look at earnings, they go up between 3 and 5 per cent a year, more than inflation," he said. "We get more productive each year."

But he admitted: "We are doing more things, but we still feel pressured for time."

Most cash now stays in house

WEEKLY receipts collected by UK households have dramatically altered in the last 50 years, amid changing technologies and lifestyles.

We are now a nation of home and car owners, and those major investments swallow up the two biggest chunks of our expenditure – 19 per cent and 16 per cent.

Conversely, food and non-alcoholic drinks, which were once the largest outgoings, now account for 15 per cent of expenditure, compared to 33 per cent half a century ago. Clothing and footwear also take a smaller cut of the average household budget, down from 10 per cent in 1957 to just 5 per cent.

According to the ONS Family Expenditure Survey, released yesterday, leisure goods and services now account for 19 per cent of spending – ten percentage points more than in 1957. The report says the largest increase in the sector came after 1977.

And there are many more ways to spend cash on recreation and entertainment.

Professor Donald MacRae, chief economist at Lloyds TSB Scotland, said: "We have had a huge explosion in the amount of media available – whether PCs, films, television radio or the internet.

"Sports facilities are far larger, and there's more to do."

The greatest spending on audiovisual goods was north of the Border. Scots spent an average of 7.80 per week on televisions, computers and videos per week – 70 per cent more than the UK average.

Scotland also has the highest spending on package holidays – 16.80 a week, which is 28 per cent higher than the national average.

Scots also spent the most on alcohol – 7.30 per week, 13 per cent higher than in the rest of the UK. Across the UK, proportional spending on drink has stayed constant at 3 per cent, while spending on tobacco has dropped from 6 per cent to 1 per cent.

The report also looks at the top 50 items as a proportion of household spending.

In 1957, this list included 20 items of food and drink including fresh milk; beef and veal; mutton and lamb, and sugar.

The latest report contains just ten food and drink items, among them takeaway and snack food. But unlike in 1957, fresh vegetables do appear – ranked in 34th place.

Prof MacRae said grocery shopping habits could account for the drop in spending on food generally, with visits to stores now likely to take place weekly rather than daily as in the 1950s.