HOUSEHOLDS WORSE OFF - OR NOT ?

It is quite amazing how figures can be manipulated and distorted to produce pretty well any answer that those doing the manipulation want to arrive at.

The Institute for Fiscal Studies has just issued a report in which they claim that typical households will each be £5,000 a year worse off by 2021 than they would have been had the financial crisis of 2007/8 not happened. They attribute this to an 'income squeeze' over the intervening period. Fine. Given their accepted expertise, they are bound to be correct, aren't they ?

Actually, it depends on just how one looks at the figures and events.

Incomes, and general wealth, in the period immediately prior to the cataclysmic events of 2007/8 were greatly inflated due to the uncontrolled and ultimately disastrous lending encouraged by governments and happily entered into by banks and other financial institutions which saw only profits ahead. Once this 'froth' was removed, the true state of affairs was revealed and a more realistic picture emerged. In simple terms, we had been paying ourselves too much and were enjoying a level of 'wealth' which was largely illusory.

A correction was inevitable and would have occurred sooner or later; that it happened in 2007/8 is now history. The IFS may well be mathematically correct in their claims but they have clearly failed to take account of the underlying economic weakness at that time and the fact that real incomes could not be sustained at an inflated level indefinitely; consequently, their conclusions have been presented in the wrong light. Their projections for 2021 do not show, as they claim, that households will be 'worse off', instead they show a far truer picture of the real position once the financial profligacy of the pre-crisis period is excluded; they should not be seen as a consequence of the effects of economic policy since.

The IFS and it's parent body, the Joseph Rowntree Foundation' are left-leaning organisations which have an interest in promoting the causes of the supposed 'poor' and 'disadvantaged'. As such, their reports are not immune to political bias and should be treated with a degree of scepticism, at least in so far as their bland conclusions are concerned. 

Beware experts, no matter how respected and lauded they may be.