LIVING standards are the worst since the last war ‘if not since the 1920s’, the leader of the Institute for Fiscal Studies (IFS) declared yesterday, adding that the outlook for wages is ‘dreadful’.
In a separate analysis, the Resolution Foundation warned that the biggest losers between now and 2020 will be lower income families, with the poorest third set to see their incomes drop, driving them into destitution.
The day after Chancellor Hammond’s Autumn Statement, the two independent economic research organisations poured buckets of cold water on the Tory government’s handling of the economy.
IFS Director Paul Johnson said: ‘This has, for sure, been the worst decade for living standards certainly since the last war and probably since the 1920s. We have seen no increase in average incomes so far and it does not look like we are going to get much of an increase over the next four or five years either.’
The ‘outlook for living standards and for the public finances has deteriorated pretty sharply over the last nine months’, he added. Real average earnings – which factor in the rising cost of living – were forecast to rise by less than 5% between now and 2021. That forecast is 3.7% lower than was projected in March.
‘Half of the wage growth projected for the next five years back in March is not now projected to happen. On these projections real wages will, remarkably, still be below their 2008 levels in 2021,’ Johnson said. One cannot stress enough how dreadful that is – more than a decade without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years.’ The IFS warned that workers would earn less in real wages in 2021 than they did in 2008.
Meanwhile, the Resolution Foundation think tank said the assault on living standards will be worse during this Parliament than between 2010 and 2015, with lower growth in pay, an accelerating rise in the cost of living and welfare changes such as a freeze on working age benefits.
‘Taking all this together we can look at the outlook for family incomes in the coming years, and it paints a grim picture,’ the think tank said. The Foundation said the income of the poorest 10% would be hit by more than 3% by 2020 as a result of tax and welfare policies.
‘While top earners were hit the hardest following the financial crisis, the big difference looking forward is that the biggest losers are lower income families, with the entire bottom third of the income distribution set to see incomes fall in the years ahead.’ Other figures published yesterday show consumer credit, ie borrowing, growing at the fastest rate since 2006.
According to the British Bankers’ Association, which represents the High Street banks, borrowing is up 7% year on year, with consumers borrowing an extra £633m on credit cards, overdrafts and personal loans in October, with interest rates remaining low.