Who pays for the brownies?

The real indicators that should worry the government are often found in lesser articles that merit a Treasury dismissal. One wonders if the government believes its own arguments or do they live the lie. One key area that may become a potent measure of discontent is disposable income:

In 1997, when Labour came to power, people were left with 34.5 per cent of their gross income once they had paid taxes, national insurance, mortgage or rent. Now they are left with 32.6 per cent, says a report by uSwitch, a price comparison website.

It is the latest survey to highlight how millions of households have failed to benefit from the strong economy because of rising taxes and escalating bills. Ernst & Young, the accountants, calculated this year that the average family had £838 left to spend each month, compared to £899 four years ago.

The uSwitch report makes clear that many household bills have actually risen more modestly than people's salaries, including the monthly, electricity, water and gas bills.

These reports demonstrate that increases in expenditure have been identified in four areas: petrol prices, house prices, communication prices (mobile and broadband) and council taxes. Since the increases are broadly based across services and the taxes, consumers have not blamed their fragile position on increased taxes. Moreover, private equity and debt have bouyed consumption. As these drivers of consumption growth are now ending, without much indication that households will benefit from further deflation, the effect of further tax rises will be more clearly felt.

The government will be left naked as resistance to further taxes, clear or stealth, bites into their poll ratings. They will have to come up with more honest responses than knee-jerk rejectionism:

A Treasury spokesman denied that Government tax policies had eaten into incomes.

He said: "As a result of tax and benefit measures introduced by the Government, this year all households will be on average £1,000 a year better off in real terms and families with children will be on average £1,550 a year better off in real terms, compared to 1997."