Toucan

While our incomes may have been going up, so have taxes and essential living costs leaving UK households with the lowest disposable income levels for 10 years. A study by uSwitch.com has shown that we are now handing over even more of our hard earned money as taxes, bills and other living costs have risen  faster than our wages. With taxes having risen by 85% and social contributions by 77%, net household income as a proportion of gross household income has fallen by 5%. Ten years ago, net household income accounted for 68% of gross income, whereas today it accounts for just 63%¹. And we have even less money to spend on fun. The report also highlights that we now have an even smaller chunk to spend on ‘non-essential’ items than at any other time during the last decade. Disposable household income in 1997 accounted for 35% of gross household income (£12,000), but today, at £17,000, it accounts for just 33%².

Mike Naylor, Personal Finance expert at uSwitch.com, said: “Cool Britannia is now Cost-a-lot Britannia. Our pay cheques may be getting fatter, but the chunk that we have to hand over to pay taxes, bills and other living costs is growing even faster. We are working harder, but we are not getting any wealthier – we are running just to stand still.”
 

Where’s your money going?

The four areas where our pockets are feeling the tightest squeeze is housing, transport, recreation and utility costs.

A roof over your head
Houses prices have shot up by over 213% in 10 years and while some people have made a lot of money from their property, others particularly young, first time buyers can’t afford to get a step on the housing ladder. Housing costs take up a huge 19% ³ of our gross household expenditure.

Day to day travel
Transport accounts for 15% of our expenditure, from the general upkeep of a car, to spending on fuel and public transport. These costs have risen by 43%, 55% and 49% respectively ⁴.

Work hard, play hard
With longer working hours many of us feel we need to treat ourselves and enjoy our limited leisure time to the max. We’re spending 55% more on hotels and restaurants and recreation now accounts for nearly 24% of our expenditure. However costs in this area have seen an overall rise of 46% in the last 10 years⁴.

Bills, bills, bills
The explosion in broadband mobile phone usage has seen communication costs rocket by 77% since 1997. Water costs have risen by 33% in the same decade, with particularly steep increases since 2003. Electricity now costs 17% more than it did in 1997 and between 2002 and 2006 electricity prices increased by 50%⁵.

Disposable income by postcode

10 years on the traditional North – South divide on income may no longer exist, but it has been replaced by a broader regional difference in disposable income.
68% of towns in the South East have prospered in the last 10 years and have disposable incomes above the national average⁶.
However Nottingham residents spend 64% of their net income on bills, running a car, food, gas and electricity and insurance – more than anywhere else in the country. While households in Blackpool, Stoke-on-Trent and Sunderland see 60% of their take home pay being spent on bills.

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