There is little for the average household to cheer these days as inflation crushes paltry earnings increases. Inflation is running at 3% while wage rises can manage no more than 2.5%. Worse for the average household, the banks are beginning to turn off the lending taps that have allowed them to boost their incomes with cheap debt.
Things were better in the year to April 2017, according to the number crunchers at the Office for National Statistics, who have lifted the lid on Britain’s spending habits in their annual family spending report.
It shows that average weekly household spending clawed its way back from the depths of the 2009 recession to exceed the pre-crisis level for the first time.
This slice of good news, albeit five or six years later than many economists thought it would happen, disguises how the better off have thrived compared to those on the bottom rung of the income ladder.
For instance the richest 10% spent more on wine per week (£9.40) than the poorest 10% spent on water (£7.30).
In the same vein, the richest 10% spent £59.40 on “furniture and furnishings, carpets and other floor coverings” to almost match how much the poorest 10% spent on rent (£62.70).
Challenging the idea that the poorest waste their money on booze and cigarettes, the survey found that the richest 10% devote twice as much of the weekly shop (£17.50) to “alcoholic drinks, tobacco and narcotics” as the poorest.
But it is the new rich, the 65- to 74-year olds that really catch the eye. Their spending might not match that of the top 10%, yet it significantly powers ahead of anything the average 20-something can muster on areas like entertainment and recreation.
The figures show that people in the 10 years from their 65th birthday go on a spending binge that means devoting nearly a fifth of their total expenditure on recreation and culture, double the 10% spent by the under-30s.
This is the final salary pension bonanza that can only be described as a once in a generation spending boost. The same applies to those of all ages on below average incomes. They increased their spending by a startling 7% on the previous year, far more than the 1% increase across the richest half of households. Unfortunately they managed this largely by running down savings and taking on extra debt.
As banks, under instruction from the financial regulator, rein in their lending, debt-fuelled spending should be considered a one-off boon, just like the final salary payout. However, that seems unlikely. Banks remain dependent for profit on lending.