Dead Men Left

Wednesday, March 30, 2005

Those DWP/IFS figures again

There's a couple of other bits to mention on this.

First, the IFS report a very slight decline in average income over 2003/04, the first since the recession of the 1990s. The Treasury response was brutal (and predictable):

The Treasury was quick to criticise the IFS analysis.

A Treasury spokesman said the 0.2% drop could be explained in a number of ways.

The most significant was the large drop in take-home incomes reported by self-employed individuals whose profits were hit by worldwide economic slowdown.

Incomes would have actually risen by 1.8% if that group was discounted, the Treasury added.

"The IFS analysis is complete rubbish," a Treasury spokesman said.

"These figures show that since 1997, reported average take-home incomes have risen by almost 20% in real terms and are rising again this year thanks to the maintenance of stable economic growth."

"Complete rubbish", but they're happy to cite other IFS figures from the same report to make the claim. The fall in self-employed income is staggering: down 30.4% since 2000/01. Self-employed earnings are generally more volatile than others types of income - but even so this looks like a very large, not entirely explicable drop that should have lead to some obvious effects. (Possibly there is also some composition effect here, with individuals switching declining self-employed earnings for reasonably steady income elsewhere.)

Secondly, I've been rather too generous to the government - a rare mistake. On the BBC:

...the number of pensioners living in poor households has remained at 2.2 million since 1997.

Based on the IFS saying (p.30):

Using the 60 per cent of median income definition, the rates in 2003/04 imply there are now 2.0 million pensioners in AHC [After Housing Costs] poverty, down from 2.8 million in 1996/97. BHC [Before Housing Costs] pensioner poverty remains unchanged at 2.2 million...

The discrepancy is accounted for by the fact that 2/3 of all pensioners own their homes outright - a very high fraction relative to the general population - which reduces housing costs substantially.