Economists say that the cost of living crisis is over – this is why many households disagree | Money news Aitrend

Talk to economists and they will tell you that the cost of living crisis is over.

They will point to graphics showing that while inflation is still above the 2% target of the Bank of England, it has dropped considerably in recent years and is now “only” between 3% and 4%.

So why is the cost of living always feels as an urgent problem for so many households? The short answer is because, depending on how you define it, it has never ended.

Economists like to focus on variation in prices in the past year, and certainly on this measure, inflation is highly decreasing, two -digit levels in recent years.

But if you look at in the past four years, the change rate has been at the highest since the early 1990s.

But even this, underestimates the complexity of the economic circumstances faced by households across the country.

Because if you want an idea of how the current financial conditions really feel in people’s pockets, you must really compensate for inflation against wages, then take into account the impact of taxes.

It is a complex exercise – in part because the experience of two households is not alike.

But the recent research of the Resolution Foundation illustrates part of the dynamics taking place below the surface, and stresses that for many households the cost of living The crisis is still very real.

The place to start here is to recall that the best measure of the economic “sensation factor” may be to remove inflation and the taxes of nominal remuneration of people.

You end up with a statistic showing your real disposable income.

Consider the planned model in the coming years. For a household earning £ 50,000, profits should increase by 10% between 2024/25 and 2027/28.

Subtract the projected inflation during this period and suddenly 10% fall to 2.5%.

Now subtract the real increase in payments from national insurance and taxes and fell to 0.2%.

From now on, subtract the projected council tax increases and suddenly, which started to increase 10% is in fact a decrease of 0.1%.

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Of course, the degree of change in your situation may differ depending on all kinds of factors. Some employees (in particular those close to the tax thresholds, which in this case include those of £ 50,000) estimate more than the impact of tax changes than others.

Retirees and those who have their house have a relatively lower increase in housing costs in the coming years than those who pay mortgages and (in particular) rent.

The experience of everyone’s inflation is not the same either. In general, low -income households pay much more from their income on essential elements, such as housing costs, food and energy. Some of these costs increase quickly – the United Kingdom faces higher energy costs than any other developed economy.

But the ultimate verdict provides clear models. Retirees can expect an additional increase in their wages to take away in the coming years. Those who have their house and with mortgages can probably expect the benefits to exceed additional costs. But others are less lucky. Those who praise their private houses should see net falls in the income of their household – and children are likely to see more falls in their economic well -being.