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How Cameron misled MPs on living standards

The PM's claim that individuals' disposable income rose last year is not supported by the data.

David Cameron listens to questions from journalists at Stormont Castle in Belfast, Northern Ireland on October 11, 2013. Photograph: Getty Images.

As Ed Miliband charged him with presiding over a "cost-of-living crisis" at today's PMQs, David Cameron made an eye-catching claim:

What you have to do is look at disposable income as well as wages. Because this government has cut people's taxes, because we are allowing people to keep £10,000 of what they earn before they pay taxes, disposable income went up last year and it is rising as we speak today.

Given that, as Miliband stated, real wages have fallen for 39 of the 40 months that Cameron has been Prime Minister (the exception being April 2013 when deferred bonuses were paid out following the abolition of the 50p tax rate) how can he state that "disposable income went up last year"?

The PM's claim relates to the fact that real household disposable income rose by 1.6% in 2012. This, crucially, is not a measure of individuals' spending power (as Cameron implied), or of average household income, but the figure reached when all households' post-tax income is added together. Since the number of households increases each year (raising the absolute figure), this is a poor guide to living standards.

A better measure is the rate of average weekly earnings growth, which stood at just 0.7% in June-August, a 2% real-terms cut with inflation at 2.7% (the highest level in the EU). Even on the Tories' preferred metric, the picture is a grim one. In the most recent quarter, real household disposable income fell by 0.7% year-on-year. As much as he may wish otherwise, Cameron hasn't got a good story to tell on living standards yet.