Average family £5,000 a year worse off after 2008 crisis

Average families are thousands of pounds a year worse off because of the "long shadow" of the financial crash, says a leading think-tank.

In a report for the Joseph Rowntree Foundation, which campaigns against poverty, the Institute for Fiscal Studies (IFS) says low-income households are suffering most from low wage increases, depleted benefits and tax changes following the 2008 crisis.

It also warns that living standards are growing at their weakest rate for nearly 60 years.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

According to the report, the average family will be £5,000 a year worse off in 2021-22 than they might have expected to be had the crash not happened.

The statistic is based in part on official forecasts. The Office for Budget Responsibility predicts long-term income growth will be two per cent a year, reports the BBC, which the IFS says means average income will not increase at all over the next two years when rising costs are taken into account.

It adds that low income growth is only one factor holding back increases in living standards, with cuts to benefits imposed as austerity measures, changes to taxation, the general state of the economy and low productivity all playing a part.

In particular, it says the government's freeze on increases in working-age benefits for the next four years means low-income families with children will be the worst affected group.

Campbell Robb, chief executive of the Joseph Rowntree Foundation, said: "These troubling forecasts show millions of families across the country are teetering on a precipice, with 400,000 pensioners and over one million more children likely to fall into poverty."

He added: "It is essential that the Prime Minister and Chancellor use the upcoming Budget to put in place measures to stop this happening. An excellent start would be to ensure families can keep more of their earnings under the universal credit."

[b]Pensioners overtake workersIn a reversal of the situation ten years ago, pensioners will see their income growing faster than that of earners by 2021-22, says the report.

It warns: "Once you account for their lower housing costs and smaller household size, median income is projected to be nearly eight per cent higher for pensioners than for non-pensioners by 2021-22, having been nearly 10 per cent lower in 2007-08."

A Treasury spokesman said: "We are taking action to support families with the costs of living by cutting taxes for millions of working people, doubling free childcare for nearly 400,000 working parents and introducing the National Living Wage - a significant pay rise for the lowest earners."