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Friday, February 17, 2012

An Average Income of £500 a Year

  This is from a British "Hostess Book" published in 1937. It says where the £500 a year, upper middle class, household budget went.

Rent, rates and taxes  - £80 = 16%
Food and small household expenses - £150 = 30%
Heating and lighting - £20 = 4%
Education - £45 = 9%
Insurances - £20 =4%
Clothes = £85 = 17%
Maid's Wages - £30 = 6%
Health (doctor and dentist) - £10 = 2%
Recreation and holidays - £30 = 6%
Miscellaneous (subscriptions, etc.) - £15 = 3%
Savings - £15 = 3%

Ah how things change.

I have, for some time, being trying to find rates figures for for the past without success. I think it would be reasonable to take rates as about £20 of the above and divide rent and taxes at £30 each.

Lets see what that would be in today's money, according to this inflation calculator site. First as a proportion of income and second on retail price equality and then as a proportion of per capita GDP.
Food and small household expenses - £150 = 30% £7,950 retail price index; £23,100 average earnings; £33,200 per capita GDP
Rent, rates and taxes - £80 = 16% £4240; £12,300; £17,700
(Assuming rates £1060; £3,075; £4,400
and Rent/Taxes each £1,590; £4,610; £6,640 )
Heating and lighting - £20 = 4% £1060; £3,075; £4,400
Education - £45 = 9% £2,380; £6,920; £9,960
Insurances - £20 =4% £1060; £3,075; £4,400

Clothes = £85 = 17% £4500; £13,100; £18,800
Maid's Wages - £30 = 6% £1,590; £4,610; £6,640
Health (doctor and dentist) - £10 = 2% £580; £1540; £2,200
Recreation and holidays - £30 = 6% £1,590; £4,610; £6,640

Miscellaneous (subscriptions, etc.) - £15 = 3% £800; £2,300; £3,320
Savings - £15 = 3% £800; £2,300; £3,320

Total £500 = £26,500; £76,900; £111,000 

I doubt if many families spend £23,100 on food and household expenses now.On the other hand you don't have to be upper middle to be paying £4,610 in income tax alone and people on the dole will probably be paying that much in other taxes today.Rates are probably only slightly up, for the sort of expensive house such a family would have but remember that at least 80% of council bills are paid from the rate support grant today.

The average British electricity bill is now £1,300, though it is intended to rise 60% to just over £2000. Again making comparison with the well off household here means that they will probably be paying more as a proportion of income (certainly far more as in RPI terms) than then, though to be fair they will have more electric goods.

Education - private schools can cost less than £6,920 though not for a family with more than one children so it looks like this is more expensive in real terms. Schooling is relatively labour intensive  and certainly more regulated so no surprise.

House insurance probably about the same but car insurance will be up. The major part of car insurance is public liability - however it is worth mentioning that deaths from motor vehicles are lower than in the 1930s even though the number of cars is 10s of times larger. I guess back then the dead and injured didn't sue.

Clothes - I couldn't spend £13,100 on clothes if I wanted to but I'm certain some women could.

Maid's wages. £4,610 would be about £2.30 an hour .Admittedly she will be getting full board on that basis and a modern employer would certainly charge for that. However it gives her £90 a week to spend on herself, or possibly send home (then to the working class neighbourhood, now to Slovakia). The killers are probably PAYE and the numerous regulations and paperwork any employer has to deal with
, which will probably take a lot more time than loading your own washing machine or dishwasher.

Health - OK so taxes are higher but we do have doctors, though in practice not dentists, on the NHS.

A £4610 family holiday would be a very expensive one. Even straight RPI comparison of £1,590 is high. Probably the falling cost of flying has greatly reduced it in real terms as well as improving it - that 1936 holiday was probably in somewhere posh like Bournemouth. People are also more likely to have more than 1 holiday and weekends away nowadays.

Subscriptions etc will also include Sky, AOL & so on.

Most savings will now be through pensions. Nominally national insurance payments  include pension savings.

The biggest proportional change is the massive differential change between average earnings being only 2/3rds of the GDP increase.I assume this is the increase in our tax burden, particularly the "stealth taxes which don't come directly out of ay packets but we do pay for - everything from VAT to corporation tax..

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