New research has found that the average household income in the UK is shrinking by £1 per day
thanks to low savings rates, high inflation and frozen wages. The Institute of Fiscal Studies data
found that the average income of British households is 1.6 per cent lower in 2011 than in 2008, a
loss of £360 per year.
New figures buck trend of last 50 years
The figures show a sharp contrast to data from the last fifty years, during which incomes in the UK
have risen by an average of 1.6 per cent each year.
According to This Is Money, ‘the poorest 10% of households have seen real incomes fall by 2.1 per
cent in the three years since 2008 – a drop of £182 every twelve months. Richer households fared
even worse. The top 5 per cent of earners saw incomes drop 3.8 per cent, which works out at £2,230
lost every year.’
Government policy likely to restrict income growth
Government policy regarding reducing Britain’s deficit is likely to mean that incomes will stay stable
over the next couple of years, says a leading think-tank.
Paul Johnson, the director of the Institute for Fiscal Studies, told Radio 4: “Given what we know
about the Government’s plans for tax rises and benefit cuts, it certainly looks like it’s going to be a
couple of years before we start to see incomes rising.
“If that’s the case, it looks like we will have a five-year period in which incomes have not risen, which
will be the first time we have seen that for about 40 years.”
Savers hit hard by low rates
The incomes of savers and pensioners have been hit particularly hard by low interest rates.
Pensioners have seen real annual income fall £246 (2.4 per cent) since 2008 in a period where they
would normally have expected incomes to rise by £960.
Savers have also seen their income fall, as investors now receive just 0.84 per cent a year on the
average instant access savings account. Figures from Moneyfacts show that this is compared to an
average of 4.1 per cent received in February 2007.
