Income Tracker Methodology Changes
The January 2012 edition of the Income Tracker report is based on an updated methodology.
In order to keep the Income Tracker model relevant and credible we have decided to do the following;
- Use the most up to date ONS Living Costs and Food Survey (the 2011 edition, which covers household expenditure and income in 2010)
- Reflect lower trend growth in the volume of essential goods and services in the post- financial crisis environment by revising down our volume assumption to 0.5pc from 1.4pc.
As you’ll appreciate this makes the latest vintage of Income Tracker data not directly comparable with previous versions – but the time series now available is up to date as possible with the latest detailed data on household expenditure. See page 17 for how this impacted the income tracker model in 2010.
In addition to the rebasing a significant contributing factor to the improvement in spending power is the fact that last January’s increase n the VAT rate to 20.0 per cent is no longer shown in the annual price comparison. However this price increase is still built into the cost of living and will have a long- lasting effect on family purchasing power. The below table gives you an idea of the impact of these changes. As you can see, the new model behaves in the same way as the old model, i.e. seeing a £1 improvement in family spending power, just from a lower base figure.
These changes have affected the absolute level of the income tracker and the year-on-year change; however, the overall message of how discretionary incomes have developed has not changed. A detailed briefing on the revisions is available on request.