Wednesday, March 23, 2011

UK households face biggest income fall since 1970s as inflation bites

Britons are suffering their biggest drop in living standards for 30 years, according to a new report by the Institute for Fiscal Studies (IFS).

The average household's "real" income – what is coming in after inflation is taken into account – will have fallen by 1.6pc over the three years to the end of 2011, the influential think-tank said ahead of Wednesday's Budget.

In contrast, over the previous half a century, real incomes rose an average 1.6pc a year, or 5pc every three-year period.

The study flags up the fragility of the UK's economy as it struggles out of the deepest recession since the 1930s.

The current decline marks the first drop in the average household's income over any three year period since the early 1990s, and represents the most dramatic fall seen since the start of the 1980s, the report said.

The squeeze signals a loss for the average household of £360 a year, said the IFS, a hit totalling £1,080 over the three-year period. (read more)