According to the Institute for Fiscal Studies, the average British household is 6 per cent poorer in 2014 than it was before the 2008 financial crisis. The think tank has claimed that households are unlikely to recover in the period leading up to the 2015 general election.
The Institute for Fiscal Studies is “trusted by left and right” political organisations, as reported in a recent Financial Times profile. Political analysts believe that data indicating households are no longer as well off as they previously have been could be a major challenge for the government as it prepares for the election.
Critics of the government’s economic recovery policies, particularly those from the Labour Party, claim that the purported recovery has involved “no recovery at all” for the “working people” of the UK. The projections released by the IFS are the first real indication of household income growth to become available since 2011/12.
According to the IFS, household income will increase slightly during this financial year, but will likely fail in reaching pre-crisis levels by 2015/16. Spending cuts and weak wage growth have been linked to the slow improvement in household income for most of the UK.
After the data was released, both Labour and the government tried to use it against their opponents. Chancellor George Osborne claimed that the country was poorer as a result of “Labour’s great recession” and stated that median household income will rise in 2013/14.
A Labour spokesperson said that the data proves “working people are worse off under the Tories.” A spokesperson from the Trades Union Congress – an interest group for union members – stated that “last year’s recovery failed to improve people’s earnings” and warned that Britain could face “a decade of pay stagnation” if things don’t change.
The IFS report indicates that the UK’s higher-income households have experienced a larger proportionate decline in income than low-income ones. It also states that low-income households have been more affected by inflation in the period since 2008.
