Are The Rich Getting A Better Deal?
The question of one rule for one and another rule for the other is something that has instigated more revolutions throughout history than any infringement on civil rights. We don’t mind tightening our belts, as long as everyone else has to do the same. The UK is a fair nation and we always seem to pull together in times of adversity, so nobody minds shouldering their fair share of the burden when it comes to digging ourselves out of the current financial crisis. That is, as long as we all shoulder our fair share of the burden. When we have to see our children go without, we don’t appreciate those with plenty of money in the bank to rub our noses in it.
Are we all in it together?
Well, according to statistics from the Bank of England, those in the highest income brackets are better off than they were five years ago, but those of us who live in the real world are considerably worse off. The rising cost of living, non-existent pay-rises and shrinking industries affects most of us, but those who are least likely to feel the pinch continue to profit and are increasing their net worth year on year. The Bank of England’s data originated from an NMG Consulting survey created using information provided by employees of the B of E.
The resulting report confirmed that the economic environment for many households continues to be challenging, but those with the most expensive homes and highest incomes are seeing little or no change in their circumstances. This clearly show that we are not all ‘in it together’ as is being suggested by voices in the corridors of power at Westminster.
Weak Incomes Prevail
Recent figures have shown a slight rise in incomes over the last year when compared to the income levels before the recent recessions, but we are still a long way off a recovery because growth continues to be slow and irregular. Incomes have never recovered in real terms to pre-recession levels because we are still paying higher levels of VAT. The rise from 17.5% to 20% VAT signified a great change in the value of our incomes because we pay such a large contribution every time we make a purchase.
No Quick Fix
If we were to return to pre-recession tax levels, our actual spending power would increase significantly, but not immediately. Several factors have arisen since the rise in VAT that means our household income and spending power is even lower. The average household now has approximately 15% more debt than pre-recession times despite the fact high-street lenders have tightened their lending criteria. Tighter lending guidelines just meant the people with good credit records had to borrow from the sub-prime market and pay higher interest rates. For the first time, the quality of a credit history had little to do with the interest rate you paid because those with bad and good credit were obtaining loans from the same lenders.
Reducing Debt to Increase Spending
The need to increase high street spending is obvious as barely a week goes by without another household name going into administration. Increased spending will stimulate growth, but we are in a chicken and egg situation because we cannot easily decide which should come first. Does the government inject cash into the economy or continue to wait for the private sector to create growth through innovation? However, the next growth spurt is to come about, the online economy is certain to be a central feature because of the low overheads and low risks associated with maintaining online presences when compared to businesses, especially retail, maintaining traditional bricks and mortar establishments.