Oddly enough, I answered another question in pretty much a similar way to how you put your questions, and I was tarred and feathered for "not knowing what it is like for real people out there" (am I a figment of someone's imagination? I must be)!
But yes, I agree with you, people are able to obtain items on interest free credit, which 20-30 years ago, they could never afford, or would be laughed out of the store. Luxury items, as well as very basics are cheaper, and more readily available than ever, and despite the credit crunch, borrowing from unregulated firms is rife - even on JSA you can obtain a loan which you can pay back in small increments to go shopping with.
I work not too far from Picadilly Circus and Oxford street, and there are more people shopping there than ever before, and more tourists coming over to buy goods, and taking advantage of the weakened pound - it is a good time to be a retailer. The more luxury goods bought, the more VAT is being paid into the coffers. What about the VAT rise, I hear you ask, well, when the VAT was reduced for 12 months, did you see the price of everything go down? Nope, when it was raised again in January, did the price of everything go up? Not really. When VAT rises again, will there be absolute destitution, and people abandoning the high street? If history is anything to go by, not at all.
EDIT - OP, I am not saying Elephant's Child is wrong, far from it. With the cost of borrowing low for lenders, and with low interst rates, for those who can, they can switch their mortgages to trackers and that would put more money in their pocket, also, it's easy to borrow money from firms who charge exhorbitant interest, or obtain goods on credit, regardless of how shoddy your credit rating is. It's not only the very well of who are doing well, tit might sound controversial, but even the very poorest are doing better now than say 20, 30, 40, 50 odd years ago in previous recessions. If you think the poorest are having a hard time now, imagine what it was like in the post war years, where there was no NHS, the cost of clothing through the roof, outdoor toilets were still quite common in the 1970's and central heating and constant hot water? You can forget it in the 1980's and early 1990's!
I do feel sorry for parents who feel they have to buy their child each and everything they want for Christmas. My mother nipped it in the bud earlier on, explaining that if I ask Santa for too many toys, another little boy or girl will have to miss out on a present as he won't have time to make them all - a bit of emotional blackmail works wonders - and then later on, it was a case of "No, I can't afford it!", and that was that.
"I now realise that if your income stays much the same and your biggest monthly expense goes down quite a lot then you're worse off. You don't need a PhD in maths to work that one out..." I hope Oh My Cod! was being sarcastic there!