I couldn’t resist commenting on the other news headline mentioned in my previous post.
I’ve had all day to think about it, and quite honestly, I’m terrified.
OK, they’re talking about the ‘average’ household, and I know we are far from average. Always were actually.
Even when we were living in a house, the ‘average’ annual heating bills and consumption were way more than ours, and our car running expenses a fifth compared to the ‘average’ family vehicle as used in their examples.
Thick Think Tank reckons Mr and Mrs Average’s annual disposable income is £24,300 (for comparison, I wasn’t earning that in my ‘high paid’ job fifteen years ago).
Now I understand Disposable Income as being what’s left after the mortgage/rent, bills, local taxes and financial commitments are met. (Food may or may not be included as it can have a flexible value, but for argument’s sake, we’ll say NOT). Hubby and I call that Mad Money.
However, some people see disposable income as nett, ie. after taxes (pick a pie chart, disposable income on the right is in green).
If you have £24,300 per annum left over, that explains why the Government can expect you to put £15,400 into an ISA to attract tax free interest on your savings. Wow.
What an insult to people with a Gross Income of less than £15,400.
Of course, you could argue that with the increases in personal allowances, people will be paying less tax on their earnings.
But then those who are only earning £10,000 a year wouldn’t be paying tax anyway, would they.
Now take us (and perhaps some readers are saying, yes, please do).
Our individual incomes do not come close to the Government’s personal allowance, so any interest on our meagre savings is tax free anyway as we aren’t tax payers.
To suggest a disposable income of this amount to me is obscene, and frightening.
What if this was to become the norm, not average?
Those of us managing on low incomes would probably be shunned and cast aside, especially the way the Government is going about cutbacks and savings (IMO only to give away in Foreign Aid), and any financial help given to our own citizens to survive is becoming a thing of the past by either being reduced or withdrawn altogether.
Extract Income Threshold approach (link):
The UK government, the European Union and many other countries use 60 per cent of median household income as the poverty ‘threshold’. Median income is the middle point in the income range, with equal numbers of households on incomes above and below that point. The 60 per cent level is chosen as an indicator of the income at which those below are likely to be suffering hardship. As such, it is a proxy measure of poverty and, without validation from direct measures of people’s living standards, is essentially arbitrary. The threshold’s importance is that it does show how the poorest members of society are doing in relation to others, it can be tracked over time, and allows comparisons between different countries.
Not all that long ago, fuel poverty was reflected pro rata by a percentage of income. It was laughable then that because we were frugal and living within our means, our low usage was in keeping with our income and thus the percentage aspect didn’t come into play.
In true number crunching form, see this post
This ‘average’ calculation used in anything today to me is misleading and totally unrealistic. Most people can only dream of that kind of spare money, or maybe I am just so out of touch with reality myself, that I’m making an average mountain out of a miniscule molehill.
If we were Mr and Mrs Average and had this amount at our disposal for whatever took our fancy, I honestly wouldn’t know what to do with it, apart from squirrel away most of it for when times were not so good.
AND THEY WOULD COME.
Plans for old age, a luxury holiday, family, further education, a bigger and better home, can all go out of the window if a job is lost, a partner is seriously or terminally ill, business ventures fail, or any of a hundred unforeseeable things that can occur in our lives.
But think on this.
If £24, 300 is an average figure, and taking into account those on low incomes or no income being on zero contracts who are classed as employed, that’s an awful lot of people in the higher earnings bracket to average it all out.