The political debate in the UK about living standards has been given a fresh twist by new figures from the Office for National Statistics showing a decline in household incomes last year.
The ONS said that a previously announced 2.5% rise in real, inflation-adjusted incomes in 2015 - the biggest increase since 2001 - had been the result of estimates of the non-cash benefits households receive from being owner occupiers.
Stripped of these so-called imputed rents and other elements that households would not recognise as income, the ONS said real living standards fell by 0.2% in 2015, following a 0.7% decline in 2014.
The ONS said that its alternative measure of living standards did not count things that were not directly observable by households.
It added that imputed rentals represented the value of housing services that owner occupiers derive from their homes – the amount that they would have to pay in rent to achieve the same consumption of housing services.
“Whilst this concept is important when measuring economic output, it is not expenditure directly observed by home owners. As a result the national accounts measure of real household disposable income can differ from the perceived experience of households.”
The alternative method for calculating household incomes shows a more modest recovery since the deep slump of 2008-09. The ONS said living standards were 2.8% higher than their pre-recession peak in the first quarter of 2008, when inputed rents were included, but only 2.1% higher on a cash basis.
The ONS’s chief economist, Joe Grice, said: “These new estimates help to tell the story of changing household incomes in a way which is closer to the actual experiences of households.
“While the headline figures, containing imputed elements, are important for giving a coherent picture of the economy, these new figures shed light on how household incomes are changing in cash terms.”
