Mark Wadsworth

This is a spare 'blog in case my main 'blog at isn't working

Falling Real Wage Fun (2)

Having downloaded monthly tax receipts and the Retail Price Index for the last three years, we can do the same exercise for total spending on VAT-able goods and services (inclusive of VAT), adjusted for RPI inflation* as another proxy for the state of the economy:The adjustments are a bit fiddly, because VAT went down from 17.5% to 15% in December 2008, back up to 17.5% in January 2010 and then up to 20% in January 2011. Most firms use the calendar quarter, i.e. April receipts relate to outputs in the three months January – March, so I averaged out receipts for the preceding three months to get rid of the saw tooth effect, and then applied the RPI deflator to put everything into April 2011 equivalent prices.

All in all, the line is pretty flat, which contradicts the previous chart showing total real wages falling by nearly ten per cent over the same three years; the increase in welfare spending and some dis-saving may have made up for this – even though other sources tell us that people are now paying off their mortgages and credit cards again. Ho hum.


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