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Are some UK households really 25% better off than they were 18 months ago?

A survey by Ernst & Young has opened up a very controversial and difficult debate regarding disposable income across the UK. The survey suggests that the reduction in UK base rates by the Bank of England has led to an average £200 a month mortgage saving for households in full employment. While there is no doubt that reduced interest rates have impacted upon monthly mortgage payments, this argument will not gain much support from those who have recently lost their jobs.

In a perfect world the supposed 25% increase in disposable income would go straight into the UK economy thereby stimulating growth in the future. However, those expecting a significant strengthening of the UK economy in the short to medium term will be sorely disappointed to learn that much of this 25% increase in disposable income is apparently being used to pay off additional debt.

In many ways we are looking at a two tier UK population with regards to those affected by unemployment and those households still in full employment. The difference between the two is enormous in many cases and could exacerbate the class wars in the UK over the coming years.

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