After seven nightmare years, average incomes in the UK have finally made it back to where they were before the banking crisis, according to the Institute of Fiscal Studies.
The IFS analysis said that household incomes were “finally strengthening” after the slowest recovery following a recession in history. It said that recovery had been a “remarkable feature” of the plunge into economic woe.
A family with two children is now earning £31,000 on average after tax. It stood at £30,700 in 2007, but fell significantly in 2012 and 2013 before hitting £31,000 last year.
The agency said it was “almost certain” the “inevitable decline” would have happened no matter what government had been in power.
The squeeze on household spending ability and assault on living standards has lasted longer than previous recent recessions. Between 2011 and 2014, incomes rose by 1.8%. Following the recession in the early ‘80s there was 9.2% growth and again the ‘90s recession saw a 5.1% increase.
The slow growth of salaries has held back the recovery as people were not able to commit to spending. At the same time, tax increases and benefit cuts have narrowed incomes.
Andrew Hood, an author of the report, said: “The young have done much worse than the old, those on higher incomes somewhat worse than those on lower incomes, and those with children better than those without.”
The Institute of Fiscal Studies highlighted evidence that households consider the downturn to have permanently affected their income prospects.
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