Value of money drops by two thirds

Feb 25 2013

The value of money has fallen by two thirds over the past 30 years, according to research by the Bank of Scotland.

It said £1 million in 1982 would provide the same spending power as £3 million today.

Prices for essential household items have risen "substantially" since 1982, the bank said, as a loaf of bread costing 32 pence then was up to £1.24 last year.

The average price for a detached property has gone up six-fold in the same period, from £45,211 to £273,7002, while diesel fuel is 294% more expensive now and the price of coffee has more than doubled, according to the research.

It said purchasing power has been "eroded" in the last three decades because of rising retail costs, as £100 in 1982 is equivalent to £299 in today's spending environment.

Bank of Scotland also said that, if retail prices were to rise by 2.8% annually, the value of money would decline by a further 56% over the next 30 years. It would mean £229 in 2042 would have the same spending power as £100 today.

Almost £2.3 million would be needed to enjoy the equivalent lifestyle of a person with £1 million currently.

Nitesh Patel, economist at Bank of Scotland Private Banking, said: "The value of money has fallen substantially over the past 30 years as retail prices and the cost of many everyday items has soared.

"Someone today would need nearly £300 to have the same spending power of £100 in 1982, meaning someone breaking the million pound mark 30 years ago would have the equivalent of £3 million today.

"Looking to the future, even if inflation is kept firmly under control and rises only in line with the government's target, it is likely that the value of money will continue to reduce significantly and decline by more than half its value by 2042."