Kevin Peachey,Cost of living correspondent

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A new IFS report suggests sluggish income growth since 2009 and lower working-age incomes than other major economies

Living standards have been in the doldrums, a new report has suggested, with calls for any new government to help boost productivity.

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

While events such as the pandemic and energy price rises had influenced the situation, the UK had fallen behind some other countries, it said.

The IFS said the next government had a critical role in boosting productivity and, in turn, people’s incomes.

Citizens Advice said politicians of all parties needed to be clearer about how they would tackle issues over living standards.

“Right now, whether you can make your household budget add up is the only thing that matters,” the charity said in a blog.

Slow income growth

In its report, the IFS analysed trends since 2009 and the fall-out from the financial crisis, in the last year of a Labour government, throughout Conservative-led governments since to 2023.

It said median incomes (the mid-point of the income scale) had grown by 6% over that period.

In a 13-year period before the recession of 2008, income growth of 30% would have been expected, it said.

While the highest income households saw the weakest income growth, people across the range of ages and wages had been affected.

And the IFS said that working-age incomes had fared poorly when compared with some other major economies, reversing the position seen before 2007.

Working-age income growth of 6% from 2007 to 2019 compared with 12% in the US and 16% in Germany, it said, with little change since.

Other trends highlighted by the review, which was funded by the abrdn Financial Fairness Trust – an independent charitable trust – included:

  • a boom in jobs between the recession and the pandemic, but alongside slow pre-tax pay growth
  • tax cuts for middle earners mean someone on average earnings now pays £2,000 less tax than someone on the same earnings in 2010 (accounting for inflation) would have paid
  • while real average earnings are now higher than in 2019-20, disposable incomes are broadly unchanged due to falling employment, tax rises for some, and higher mortgage payments

Government action could help improve productivity and therefore income growth, the report’s author said.

“While there is no silver bullet, policies here can and do matter: reforms to taxes, planning, education and more can make a material difference to the UK’s long-term prospects,” said Tom Waters, associate director at the IFS.

The Liberal Democrats said family finances had suffered at the hands of the Conservatives.

Labour, the Conservatives, and the SNP were also approached for comment.

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