A leading economic think tank has revealed that it is unlikely that ‘dramatically’ low living standards will increase by the time of next year’s general election.
This means they will still not have recovered to what they were before the financial crisis hit in 2008.
The latest analysis from the Institute for Fiscal Studies (IFS) showed that with average household incomes at their lowest level for almost a decade, there was “little reason” to expect a strong recovery in living standards over the next few years.
Labour Treasury spokeswoman Catherine McKinnell expressed her concern:
“These worrying figures show those on lower incomes have been hardest hit by price rises, particularly food and energy bills.
“And on current forecasts real earnings are not expected to get back to the level they were in the final year of the last Labour government until 2018/19. In other words, working people are worse off under the Tories.”
The research also showed that families on low incomes could turn out to be the most badly affected group of the recession years, with the prospect of new cuts to benefits and tax credits adding to their financial difficulties and low living standards.
Despite this, the fall in living standards has been similar across the entire income range, but while those at the top suffered the most in terms of income reduction – on average, 9% between 2007-08 and 2013-14 – poorer households were hit the hardest by rising prices.
This is because poorer families tend to spend a higher proportion of their incomes on food and fuel, and as a result of inflation have greatly suffered. In fact, between 2008 and 2013, energy prices rose by 6% while food was up by 30%. This is compared to a 20% increase in prices overall, according to the CPI measure of inflation.
Unfortunately, as the economy picks up, the IFS is doubtful that improvements are unlikely to be spread out across the income range. It is thought those on lower incomes will be the last to see their living standards recover.