Idiocy and inflation

The Bank of England governor told us this week there has been a “lost decade” of wage growth. But is the truth really a lot worse than that?

By chance it was the same week my 90-year-old father decided to show me his carefully filed tax returns from the 1960s (yes, that’s what counts for fun in the Collinson household). In 1963-64 his pay as an accounts clerk in London was £1,357 a year. In today’s money that equals a little over £25,000 a year once inflation is taken into account.

In some ways that £25,000 doesn’t look so great. After all, someone working in a similar role with his level of experience at the time might expect £35,000-£40,000 today. But then look at what an income of £25,000 bought in 1963 in London.


You don’t compare incomes over time by looking at inflation. You look at incomes. Depending upon how you do it £1,357 then is £48-60k now. Which, agreed, is no great fortune in London but it’s not £25k in today’s money either, is it?

His granddaughter now works in the same city, London, for the same pay, £25,000. But what does an income of £25,000 buy you in 2016?

Well, actually, it buys you a basket of goods worth exactly the same as £1,357 bought you in 1963. Because that’s how we work out what the inflation rate is you gigantic, enormous, mong.

24 thoughts on “Idiocy and inflation”

  1. Are you saying that inflation and all the other state-caused economic antics of the past century plus don’t matter Tim?

    I think they do.

    Alright 25000 grand then and now compared to prices in the shops may not have too massive an effect. Some modern goods have dropped in price overall because of technology and trade lines have opened up to put –say sweet potatoes–in every supermarket where you might have struggled to find ’em in the 60s.

    But again–my Father supported a wife and two kids on one technical office workers wages in the 1960s. We had a mortgage, were able to buy a mini, took a UK holiday every year and acquired central heating and colour TV as the decade went on.

    Try that now on one man’s average wage.

    Something has gone on–house prices, inflation etc. Sure some things–flying etc–have opened up. But the idea that the 1960s and now are just the same economically is plain wrong.

  2. Bloke in North Dorset


    Part of that house price inflation is because women started working. In the ’60s mortgages were generally 2.5 x earnings, but as women moved in to the workplace with seriousness in the ’70s and ’80s, as opposed to retail, typing, nursing etc while they found a husband, mortgages started to be based on household income, pushing up prices.

    And it wasn’t only against what women earned, I was gobsmacked when we came back from an overseas tour in ’88 and started looking to buy in this area and we were offered 3 x my salary plus 1.5 x my wife’s potential salary as a teacher, even though we had stated she wasn’t going back to work until our son was 11, some 10 years later. Absolute madness.

  3. I look forward to the week when the Governor of the Bank of England doesn’t tell us something.

    The man seems to think he’s some kind of “personality”, a universal commentator in the mould of Bob Geldorf.

    Could he be persuaded to go on “I’m a celebrity”, I wonder?

  4. Ah, yes, 1963, £12 paid for the housekeeping, the petrol and the kid’s nursery charges. It was a little tight, we had just taken out a mortgage on a house in a desirable part of Tunbridge Wells. But if I was doing the same job now, well, I doubt if we could get anywhere near that. But these days there is always the credit cards.

  5. Houses Prices are excluded from official inflation figures. Do you want me tell you why? Perhaps you should make a bit of an effort, though

  6. “In 1963-64 his pay as an accounts clerk in London was £1,357 a year.” I wish to register a complaint. Some years later I was offered a job at Shell Centre for £1240 p.a., and I was a sharp young fellow who was going to use mathematical modelling to revolutionise their planning of the shipping of oil around the world. Less than an accounts clerk: I ask you. Hell, his was the sort of job that bloody Spud could have done.

  7. I find the accounts clerk bit odd if he’s talking about 35k etc that’s more quslified accountant territory.
    My first job as an accounts clerk in the 80s was 5.5k if memory serves

  8. @TW
    “As the RPI was held not to meet international standards, since 2013 , the Office of National Statistics no longer classifies it as a ‘national statistic’, emphasising the Consumer Price Index instead” (Wikipedia)
    Because it was always the government’s preferred index, containing no house price inflation data whatsoever,
    I saw the CPI as the “official” figure anyway.
    I cannot see why a land taxer like yourself, almost up there on a good day with Martin Wolf of FT, should choose to downplay official attempts to hide the woeful house price inflation figures.
    For those of an open minded disposition and not intent on petty points scoring (then failing ), Ross Clark in the Spectator (21st May20I5) tells the whole sorry story in the aptly titled “Why can’t we have an inflation target which includes house prices ?” Recommended as a good starting point for an escape from Pratland.

  9. Collinson senior was vastly overpaid at £25/week – in 1964 I got £6/week as a trainee programmer and in 1968 the Pru was offering less than £1100 pa to the brightest graduate actuarial trainees.

    Tim is slipping slightly in debunking Collinson’s inflation adjustment in one paragraph and then using it in another, but as a debunking device it probably works.

  10. @ DBC Reed
    RPI is a cost-of-living index so it includes rent and/or mortgage costs, not the cost of buying a house. Have you never learned that capital and operating costs are different things?

  11. @ DBC Reed
    When we were young (can you remember it? – I can) the large majority of people lived in a house rented from a landlord. So the cost-of-living index included rent but not the capital cost of the house. The latter is *not* a cost-of-living – it is a one-off cost (a decent accountant might ask that owner-occupiers include a depreciation charge comprising the amount by which ongoing maintenance plus the price of the house rises by less than the RPI as it gradually wears out in our personal cost-of-living index).
    Ross Clark must either be one of those irritating self-centred individuals who is focused on “climbing up the housing ladder” rather than actually using a house to live in or just shouting about a non-issuein order to get paid.

  12. Try that now on one man’s average wage.

    Try running a house using 1960s technology without a stay home person. No automatic washing machines, crappy vaccuums, no dishwashers etc. My mum also made clothes because the relative cost of clothing was much higher.

    The 1960s women at home weren’t idle in the way they would be now.

  13. Is all this a different way of saying that you could afford lodgings in Downing Street in 1760 for the equivalent of £10k today, but if you wanted a meet pie for lunch then it was the equivalent of what is now held a week’s average earnings?

    DBC, wasn’t it McRuin who took house price inflation out of (whatever, yawns) measure of inflation?

  14. E Lud: but if you wanted a meet pie for lunch

    Without your subsequent correction, I’d have taken that to be synonymous with “hooking up”!

  15. @j77
    Immediately post war ,when things were better organised ,the capital appreciation of houses, which you struggle to distinguish from use value, was sorted by Schedule A which boiled down to house price rises being subject to Income Tax.
    Are you suggesting a return to this arrangement which was kiboshed in 1963 by the Conservatives when Macmillan was losing his grip? Very brave in a country which has lost its reason.

  16. @ DBC Reed
    Schedule A did NOT tax the increase in house prices. It taxed the notional rent.
    As long as you talk utter nonsense, people will just laugh at you.

  17. Taxing notional rent was fine when most houses were rented, the notional rent could be determined based on actual rents. The growth of owner occupation and demise of a private rented sector made it quite unrealistic. Also if you paid a mortgage then there was tax relief on the mortgage interest, to offset the tax on the notional rent.

  18. @J77
    As the man implies: how do you calculate notional rents when an increasing number of houses are owner-occupied?
    The obvious answer is to take the readily available market values/ prices of houses and nominate a fraction of that as the rental value.Therefore, when market values go up the rental values goes up too .QED Schedule A on domestic dwellings boiled down to a tax on increased house prices.
    BTW There is a mighty piece from the young Mrs Thatcher archived on the Net explaining how to fiddle your Schedule A, starting as she meant to carry on ,pandering to owner occupiers.

  19. 1970s: my parents bought a house on the wages of a factory worker and part-time cleaner.

    2010s: same house sold for 300,000 pounds.

    Tell me again that wages have kept up with prices.

    But, hey, a house is only the single most expensive thing that most people buy in their lives. What does it matter if it’s far more expensive than it was a few decades ago.

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