Real incomes decline for the first time since 1981

Accountants may be interested to learn that last week, the ONS reported that real disposable incomes fell by 0.8% in 2010. The figure, based on what people have left after taking taxes into consideration, shows the first decline in ‘real’ incomes since 1981.

Per capita, real income dropped to £13,980 last year from £14,181 in 2009. Unfortunately, economists are predicting a further decrease of 0.4% this year given that inflation is still rising, earnings are failing to keep pace and National Insurance contributions are increasing. The VAT increase, coupled with rising fuel and commodity prices has hit everybody hard.

Meanwhile, it’s married, middle-aged, middle class Brits who are finding it increasingly hard to make ends meet if you believe the latest insolvency figures from Experian. This group saw an increase of 0.45% more personal insolvencies last year than in 2009. That’s despite the overall total amount of insolvencies dropping by 1% to 157,741.

6.36% of insolvencies were amongst young single professionals and people whose salary is classed in the middle-income bracket. What might seem surprising is that the number of personal insolvencies amongst people on low incomes and those in disadvantaged sections of the society actually fell last year.

Glenrothes, in Scotland, had the highest number of new insolvency cases last year at 89 per 10,000 households whilst Chelsea, Kensington, Richmond and Wimbledon had the least.

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