A recent report has indicated a stagnation in living standards, emphasizing the need for any incoming government to prioritize initiatives that bolster productivity. According to the Institute for Fiscal Studies (IFS), an independent research organization, income growth has been sluggish across all demographics, spanning the affluent, the impoverished, the elderly, and the youth. While factors like the pandemic and fluctuations in energy prices have contributed to this situation, the report underscores the UK’s comparative lag behind certain other nations.
Highlighting the crucial role of the forthcoming government, the IFS emphasizes the imperative of enhancing productivity to elevate people’s incomes. Citizens Advice echoes this sentiment, urging politicians from all parties to articulate clear strategies for addressing issues concerning living standards. “At present, the ability to manage household finances is paramount,” the charity states in a blog post.
Examining trends since 2009 and the aftermath of the financial crisis, the IFS report reveals that median incomes have only grown by 6% over this period, significantly lower than the anticipated 30% growth in the 13 years preceding the recession of 2008. Furthermore, while the wealthiest households experienced the slowest income growth, individuals across various age and income brackets have been adversely affected.
The report also points out the disparity in working-age income growth compared to other leading economies, with the UK experiencing a meager 6% growth from 2007 to 2019, in contrast to 12% in the US and 16% in Germany. Other key observations from the review, funded by the abrdn Financial Fairness Trust, include a surge in employment post-recession alongside sluggish pre-tax wage growth, tax reductions benefiting middle-income earners, and stagnation in disposable incomes despite real average earnings surpassing pre-pandemic levels.
According to Tom Waters, associate director at the IFS and author of the report, government intervention is pivotal in enhancing productivity and consequently fostering income growth. While acknowledging the absence of a panacea, Waters asserts that policy reforms concerning taxation, planning, education, and more can significantly influence the UK’s long-term economic prospects.
Responding to the report, the Liberal Democrats attribute financial hardships to the policies of the Conservative party. Comments were also sought from Labour, the Conservatives, and the SNP.
