Calls for improved household living standards

A new report says living standards are stagnating, leading to calls for the new government to help boost productivity.

The Institute for Fiscal Studies (IFS), an independent think tank, said income growth was slowing for rich, poor, old and young.

Events such as the pandemic and rising energy prices are influencing the situation, but the UK is lagging behind other countries, the report said.

The IFS said the next government will play a key role in improving productivity and therefore incomes of the people.

Citizens Advice said politicians from all parties needed to be clearer about how they would tackle the issue of living standards.

“The only thing that matters now is making sure your finances stay afloat,” the charity says. I mentioned it in my blog.

In its report, the IFS analysed trends since 2009 and the impact of the financial crisis on the final year of a Labour government and the entire Conservative-led administration up to 2023.

Median income – the midpoint of the income scale – increased by 6 percent during the same period, according to the report.

In the 13 years before the 2008 recession, incomes were expected to grow 30 percent, the company said.

Income growth was weakest for the highest-income households, but people across a wide range of ages and wage brackets were affected.

The IFS also said incomes of working-age people are lower than in other major economies, a reversal of the situation before 2007.

The report found that between 2007 and 2019, working-age incomes grew by 6%, compared with 12% in the United States and 16% in Germany, and have remained largely unchanged since then.

Other trends highlighted in the research, which was funded by the abrdn Financial Fairness Trust, an independent charitable trust, include:

• Hiring has surged during the recession and pandemic, but pre-tax pay growth has slowed
• The middle-income tax cuts mean that someone on an average income will pay £2,000 less in tax than someone on that income would have paid in 2010 (adjusted for inflation).
• Real average incomes are higher than in 2019-20, but disposable income has remained roughly the same due to falling employment, higher taxes for some and higher mortgage payments.

Government action could lead to increased productivity and therefore higher incomes, the report's authors said.

“There is no silver bullet, but policy here matters, it really does – reforms to tax, planning, education and more could make a big difference to the UK's long-term prospects,” said Tom Waters, associate director at the IFS.

The Liberal Democrats argued that the Conservatives were hurting households.

The Labour Party, the Conservative Party and the Scottish National Party were also approached for comment.