The Resolution Foundation’s latest report unveils slow disposable income growth for UK households over the past 14 years.
- Typical household disposable incomes have grown by just £140 annually, marking a 7% rise over 14 years.
- Economic shocks like the 2008 financial crisis, Covid-19 pandemic, and high inflation are major contributing factors.
- Despite the overall sluggish growth, poorer households have seen more substantial increases in disposable income than wealthier ones.
- The findings highlight the need for targeted policy interventions to support vulnerable households and address income inequality.
The Resolution Foundation’s analysis highlights that typical household disposable incomes in the UK have increased by only £140 annually over the past 14 years, which equates to a total rise of 7% or an average of 0.5% per year. This sluggish growth is a stark contrast to the 38% increase observed in the 14 years leading up to 2010.
Three major economic shocks—the 2008 financial crisis, the Covid-19 pandemic, and recent high inflation—have been identified as key contributors to this stagnant income growth. These events have significantly impacted the economic landscape, exacerbating the slow growth in disposable incomes.
While the overall performance has been lacklustre, the report notes that poorer households have experienced more substantial income growth compared to their wealthier counterparts. This is attributed to the UK’s robust employment market and specific cost-of-living payments made last year. However, these gains have been tempered by regressive tax and benefits policies, resulting in a total income rise of 13% for the poorest households, whereas the richest saw only a 2% increase.
Economist Lalitha Try from the Resolution Foundation commented, “While global economic shocks have been a major factor, Britain’s recent record is poor compared to both its own history and many of our European neighbours. What little income growth Britain has experienced over the past 14 years has been driven primarily by rising employment, which has benefited poorer households the most.”
The report, titled “Hard Times” and funded by the Nuffield Foundation, utilised data from the Department of Work and Pensions, as well as information on jobs, pay, and housing costs. The findings reveal a modest 3.6 percentage point drop in absolute poverty since 2010, compared to a 14 percentage point reduction in the previous 13 years.
Additionally, while relative poverty levels have remained stable over the past 14 years, there has been a noticeable increase in the number of children in large families living in poverty, contrasted with a decrease in those from smaller families. This trend underscores the ongoing challenges faced by larger households in the current economic climate.
The state of the economy, particularly the cost of living crisis affecting ordinary families, remains a pivotal issue in the forthcoming general election. The Conservative Party, in power since 2010, is under scrutiny for its economic track record amidst these challenges.
The Resolution Foundation’s findings underscore the complexities of income inequality and economic growth in the UK, emphasising the urgent need for targeted policy interventions.
