Working families with children will face difficulties due to slow income growth
The UK families are likely to be poorer in 2022 than they were in during the financial downturn of 2008. According to The Institute of the Fiscal Studies (IFS), the recession has decreased the average household income by 18%. If this trend continues, by 2022 a typical family will earn £5000 a year less than they were in 2008.
The institute has stated that, despite the economic growth in the last nine years, it is “historically weak” and not enough for the recovery of people’s finances. However, they have predicted that between 2016-2017 and 2021-2022 there will be an average income increase by 3,8%.
The predictions of IFS are based on data received by the Government’s independent advisory group Office for Budget Responsibility (OBR). The experts of OBR concluded, that for the next 5 years, the increase of middle class family incomes will be only 4%, compared to an annual growth of 2% before the financial crises in 2008. This rate is even lower for poorer families.
In addition, OBR are taking into consideration the Government plan to cut benefits, which according to their forecast, the revenues the most unprivileged will decrease by 15 %.
The good news is for the pensioners
According to the IFS report, the only ones who will experience fuller wallets are pensioners.
Their standard of living will improve by 6.8% between 2016-17 and 2021-22, which is double than working people. This will mean, that the average income for a person in retirement will be 24% more in 2022 than it was in 2008. It is also expected that the number of pensioners will increase by another 400,000.
However, what concerns the experts most, is the situation of childcare. According to Campbell Robb, chief executive of the Joseph Rowntree Foundation, which is active in social research and development charities: “over one million more children are likely to fall into poverty and suffer the very real and awful consequences that brings if things do not change.” In December last year, the Foundation published a study that 7.4 million people, including 2.6 children are living in poverty despite being raised in working families. With the coming slow-down of growth, the Foundation believes that there will be more difficulties to come in the next seven years.
The IFS study also attracted some political attention. Baroness Kramer, the Liberal Democrat Treasury spokeswoman, urged the government to take measures “For all the talk about the ‘just about managing’ we have seen no real help for them. It is time for the Government to act.”, said Kramer.