Families' spending power growing twice as fast in North-East as London

Extra spending power

Extra spending power

First published in News

Families' spending power is growing almost twice as fast in the North-East as in London as the economy recovers, a report has found.

Across the UK, households had around £7 a week more in discretionary income in March than they did a year ago to spend on ''luxuries'' such as holidays, sports, cinema tickets, dining out and savings as living costs continue to ease back and the employment situation improves, according to Asda's latest income tracker.

This 4.3 per cent annual jump in spending power is the most rapid rate of annual growth seen since autumn 2012, and it means that across the country families had around £170 a week to pay for non-essentials last month, once taxes and regular bills such as food and household bills were taken into account.

All regions have seen an annual growth in their spending power, but the report said that ''spiralling'' living costs in London mean the increase it is seeing lags behind the rest of the UK by comparison.

Household spending power in the North-East has grown by 5.5 per cent annually to the first quarter of this year, while in London it has edged up by just 2.8 per cent year-on-year.

The gap between the level of discretionary incomes in London and those in the rest of the UK has narrowed slightly, from nearly 37 per cent a year ago to just under 36 per cent.

The report said the South East is seeing the most rapid increase in families' discretionary spending power, which has lifted by 5.7 per cent year-on-year to reach £183 a week on average amid a ''significant'' strengthening of the jobs market there.

In the North-East, household spending power has now reached around £115 a week and in Yorkshire and the Humber spending power has grown 3.6 per cent to £149 a week.

The report said growth in the region is being boosted by its relatively high reliance on the manufacturing and construction sectors, which are both seeing relatively rapid pay increases.

But despite the pick-up, the average discretionary income in the North-East is still half of that of London households, where it now stands at around £231 a week.

The report said that as well as high living costs, discretionary income growth in London is more ''subdued'' due to a strong dependence on the financial and business services sector, which continues to see declines in pay.

Average discretionary incomes in Northern Ireland are also starting to catch up with those for the UK as a whole, according to the report, which is compiled for Asda by the Centre for Economics and Business Research (Cebr).

Families' spending power in Northern Ireland has grown by 4.8% annually to around £80 a week. The report said this has been helped by the fact that like the North East, Northern Ireland has a strong reliance on manufacturing and construction.

In Wales, discretionary incomes have grown by 4.1 per cent year-on-year to reach £149 a week typically.

In Scotland, household spending power has grown by 3.2 per cent over the last year to reach around £177 a week, which has been helped by falling unemployment there, the report said.

Andy Clarke, president and CEO of Asda, said he was ''delighted'' to see that regions like the North East and Northern Ireland are finally seeing a stronger step towards recovery.

He said: ''There now appears to be a real momentum behind the economic recovery.''

The report is based on a combination of official statistics and Cebr's own calculations. It pointed to the recent slowing in the Consumer Prices Index (CPI) rate of inflation to a four-year low of 1.6% in March as evidence of the pressure on households easing.

It also said that falling unemployment has helped to boost household finances with more than 30 million people now in work, which is 691,000 more than last year.

The report said the cost of petrol and diesel has dropped by 6.6 per cent on a year ago, helping to bring down inflation, while mortgage interest payments are also being kept down by low interest rates.

Rob Harbron, senior economist at Cebr, said: ''Robust economic growth is expected to continue, which means it is likely that discretionary incomes will continue to rise over the coming months.''

Here are the annual increases in household spending power across the UK and the average amount of discretionary income families had to spend each week in the first quarter of 2014:

  • London, 2.8%, £231
  • North West, 3.0%, £150
  • Scotland, 3.2%, £177
  • South West, 3.2%, £154
  • Yorkshire and the Humber, 3.6%, £149
  • Wales, 4.1%, £149
  • West Midlands, 4.3%, £144
  • East Midlands, 4.8%, £150
  • Northern Ireland, 4.8%, £80
  • East, 5.4%, £192
  • North-East, 5.5%, £115
  • South East, 5.7%, £183

Comments (12)

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7:59am Thu 24 Apr 14

Graeme_r says...

But for many this apparent growth will be due to income tax personal allowances increases and reduction in petrol, not due to a growing economy as their wage rises are below inflation, especially in the public sector.
But for many this apparent growth will be due to income tax personal allowances increases and reduction in petrol, not due to a growing economy as their wage rises are below inflation, especially in the public sector. Graeme_r
  • Score: 2

8:12am Thu 24 Apr 14

laboursfoe says...

Graeme_r wrote:
But for many this apparent growth will be due to income tax personal allowances increases and reduction in petrol, not due to a growing economy as their wage rises are below inflation, especially in the public sector.
Watch this space, thinks are improving though. It takes time
[quote][p][bold]Graeme_r[/bold] wrote: But for many this apparent growth will be due to income tax personal allowances increases and reduction in petrol, not due to a growing economy as their wage rises are below inflation, especially in the public sector.[/p][/quote]Watch this space, thinks are improving though. It takes time laboursfoe
  • Score: -2

9:16am Thu 24 Apr 14

bambara says...

Poor people discretionary spending flat £0 to £0
Mr Average not changed much
Rich discretionary spending up due to high % pay rises, big bonuses and lower tax rates.

0 + 0 + £££ = Averageincrease of £

Tory response we are all better off.

THEY are of course all better off, it's just the rest of us who are struggling.
Poor people discretionary spending flat £0 to £0 Mr Average not changed much Rich discretionary spending up due to high % pay rises, big bonuses and lower tax rates. 0 + 0 + £££ = Averageincrease of £ Tory response we are all better off. THEY are of course all better off, it's just the rest of us who are struggling. bambara
  • Score: -2

9:25am Thu 24 Apr 14

laboursfoe says...

bambara wrote:
Poor people discretionary spending flat £0 to £0
Mr Average not changed much
Rich discretionary spending up due to high % pay rises, big bonuses and lower tax rates.

0 + 0 + £££ = Averageincrease of £

Tory response we are all better off.

THEY are of course all better off, it's just the rest of us who are struggling.
Here we go....
[quote][p][bold]bambara[/bold] wrote: Poor people discretionary spending flat £0 to £0 Mr Average not changed much Rich discretionary spending up due to high % pay rises, big bonuses and lower tax rates. 0 + 0 + £££ = Averageincrease of £ Tory response we are all better off. THEY are of course all better off, it's just the rest of us who are struggling.[/p][/quote]Here we go.... laboursfoe
  • Score: -4

10:22am Thu 24 Apr 14

bambara says...

Office for National Statistics figures.
Effects of taxes and benefits on houshold income 2011/2012
Poorest 20% pay 36.6% tax (indirect and direct) as a total proportion of income.
Richest 20% pay 35.5% tax (indirect and direct) as a total proportion of income.
So those with the least "discretionary income" pay a higher % of that income as tax.
Office for National Statistics figures. Effects of taxes and benefits on houshold income 2011/2012 Poorest 20% pay 36.6% tax (indirect and direct) as a total proportion of income. Richest 20% pay 35.5% tax (indirect and direct) as a total proportion of income. So those with the least "discretionary income" pay a higher % of that income as tax. bambara
  • Score: 3

10:28am Thu 24 Apr 14

bambara says...

Another point to consider.

Average income for 2013 estimated (ONS figures again) £29,900
Median figure £21,300

The Median is what the person in the middle, the Mr Average who has exactly 50% of the people earning more than him and exactly 50% of the people earning less than him is earning.
The average is just add everyones salary up and divide by the number of people.

So what an average person earns is actually £8,600 p.a. below the average wage.
Another point to consider. Average income for 2013 estimated (ONS figures again) £29,900 Median figure £21,300 The Median is what the person in the middle, the Mr Average who has exactly 50% of the people earning more than him and exactly 50% of the people earning less than him is earning. The average is just add everyones salary up and divide by the number of people. So what an average person earns is actually £8,600 p.a. below the average wage. bambara
  • Score: 6

10:56am Thu 24 Apr 14

bambara says...

The top 2% richest people in the UK own 28% of the total assets of the country.
The lower 75% (The quarters of the population added together) also owns a combined total of 28% of the assets of the country.

So when it takes 37.5 ordinary decent hard working people to equal 1 rich person, is it any wonder that an increase in the "average" discretionary income going up is not something most of the population have noticed?
The top 2% richest people in the UK own 28% of the total assets of the country. The lower 75% (The quarters of the population added together) also owns a combined total of 28% of the assets of the country. So when it takes 37.5 ordinary decent hard working people to equal 1 rich person, is it any wonder that an increase in the "average" discretionary income going up is not something most of the population have noticed? bambara
  • Score: 1

11:17am Thu 24 Apr 14

laboursfoe says...

bambara wrote:
The top 2% richest people in the UK own 28% of the total assets of the country.
The lower 75% (The quarters of the population added together) also owns a combined total of 28% of the assets of the country.

So when it takes 37.5 ordinary decent hard working people to equal 1 rich person, is it any wonder that an increase in the "average" discretionary income going up is not something most of the population have noticed?
Again, income and assts are different.

Direst taxes for the poor fell during 2011/12 from 2010/11 and they rose for the richest.

Indirect taxes rose across the board but the poorest feel it more obviously because they spend a great proportion of their income.

It will be interesting to see the 2012/13 figures when they are hopefully released next month.
[quote][p][bold]bambara[/bold] wrote: The top 2% richest people in the UK own 28% of the total assets of the country. The lower 75% (The quarters of the population added together) also owns a combined total of 28% of the assets of the country. So when it takes 37.5 ordinary decent hard working people to equal 1 rich person, is it any wonder that an increase in the "average" discretionary income going up is not something most of the population have noticed?[/p][/quote]Again, income and assts are different. Direst taxes for the poor fell during 2011/12 from 2010/11 and they rose for the richest. Indirect taxes rose across the board but the poorest feel it more obviously because they spend a great proportion of their income. It will be interesting to see the 2012/13 figures when they are hopefully released next month. laboursfoe
  • Score: -2

11:47am Thu 24 Apr 14

bambara says...

Indeed income and assets are different, but then we should also consider:

1. Is it more reasonable to tax hard work (i.e. income from working) or wealth (assets) or indeed a combination?
2. Those with the greatest assets have an income associated with those assets, which provides a rough correlation between assets and income.
(Note this discounts the relatively asset and income poor as they have no left over income after basic living expenses to generate assets with)

So if you accept that everyone should have a certain basic level of income which is required to cover basic living expenses. As is done under the current tax system with the Tax free allowance level, then a tax on assets rather than on income has some additional benefits. Notably for those living (or at least existing) in the high cost areas of London and the Southeast, who are obliged to pay high rent and living expenses. They will as a result of these expenses be relatively asset poor, and would even on moderately high salary be largely exempt from an asset tax.

Note also that "direct taxes" for the richest were reduced due to a 5% cut in the tax rate for those on over £150k, a cut from 50% to 45% is by definition not a rise.
Indeed income and assets are different, but then we should also consider: 1. Is it more reasonable to tax hard work (i.e. income from working) or wealth (assets) or indeed a combination? 2. Those with the greatest assets have an income associated with those assets, which provides a rough correlation between assets and income. (Note this discounts the relatively asset and income poor as they have no left over income after basic living expenses to generate assets with) So if you accept that everyone should have a certain basic level of income which is required to cover basic living expenses. As is done under the current tax system with the Tax free allowance level, then a tax on assets rather than on income has some additional benefits. Notably for those living (or at least existing) in the high cost areas of London and the Southeast, who are obliged to pay high rent and living expenses. They will as a result of these expenses be relatively asset poor, and would even on moderately high salary be largely exempt from an asset tax. Note also that "direct taxes" for the richest were reduced due to a 5% cut in the tax rate for those on over £150k, a cut from 50% to 45% is by definition not a rise. bambara
  • Score: 2

2:09pm Thu 24 Apr 14

Mod says...

What we need is a Labour government to sort out our economy then everything will be fantastic again.
What we need is a Labour government to sort out our economy then everything will be fantastic again. Mod
  • Score: 0

2:13pm Thu 24 Apr 14

Auldgadgey says...

I am using my extra spending power to buy a pair of Lidl binoculars so I can spot flying pigs. There are more around now under the coalition government and they are getting bigger.
I am using my extra spending power to buy a pair of Lidl binoculars so I can spot flying pigs. There are more around now under the coalition government and they are getting bigger. Auldgadgey
  • Score: 1

2:16pm Thu 24 Apr 14

John Durham says...

The amount of actual discretionary spending power in the North East remains lowest in Britain but because in the last quarter's figures we had been one of only two regions to show a fall in spending power the increase, though no higher in actual terms compared to other areas, was 'proportionately' better.
We also remain the lowest area for annual incomes according to the same report.
A long way to go for the North East would be a better headline I think.
The amount of actual discretionary spending power in the North East remains lowest in Britain but because in the last quarter's figures we had been one of only two regions to show a fall in spending power the increase, though no higher in actual terms compared to other areas, was 'proportionately' better. We also remain the lowest area for annual incomes according to the same report. A long way to go for the North East would be a better headline I think. John Durham
  • Score: 0

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