U.K. Five Years Away From Pre-Crisis Living Standards, IFS SaysSvenja O’Donnell and Robert Hutton
British people’s standard of living may take years to return to their pre-crisis level, with the poorest households remaining the most vulnerable to rising food and energy prices, the Institute for Fiscal Studies said.
The Office for Budget Responsibility forecasts that real earnings won’t return to their 2009-2010 level until 2018-2019. A report from the IFS published today said cuts to benefits and tax credits will push down incomes further.
Median household income in 2013-2014 is more than 6 percent lower than before the crisis, the IFS said. While the incomes of the richest have fallen the most in cash terms, the poorest have seen higher inflation.
“Those on lower incomes have typically experienced significantly greater inflation than those with higher incomes,” said Abi Adams, co-author of the “Squeeze on Incomes” report. “Differential inflation has largely undone what would otherwise appear to be a significant reduction in inequality.”
With the economy recovering, the opposition Labour Party has focused on what it calls the “cost-of-living crisis,” arguing that the government should have done more to help voters. Leader Ed Miliband has pledged to make energy companies freeze their prices if he’s elected.
In the government’s favor, employment has held up better than in previous recessions. According to the Labor Force Survey, employment fell by 729,000 between June 2008 and March 2010, less than half the drop in the previous two recessions. It also recovered in half the time taken after the last two.