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- Author, Faarea Masud and Lucy Hooker
- Role, Business reporters, BBC News
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Slow economic growth and three major economic shocks have caused household disposable income to grow very slowly since 2010, according to a report by the think tank.
Typical household incomes have risen by just £140 a year, new analysis by the Resolution Foundation has revealed.
That’s an overall increase over a 14-year period of just 7% – or an average of half a percent per year – in the amount people have left to spend after tax.
By contrast, disposable income grew by 38% in the 14 years to 2010, the poverty think tank wrote.
However, poorer households experienced stronger income growth than wealthier ones.
The Resolution Foundation said the 2008 financial crisis, the Covid pandemic and high inflation contributed to the slowdown, but that growth in general was also “slow”.
This has led to income growth “slowing down to zero”, which he says has hampered progress in reducing poverty levels.
The state of the economy, and particularly the pressure on ordinary families due to the cost of living crisis, is a central issue in the general election, with the Conservatives defending their record in government since 2010.
The think tank’s analysis found that poorer households saw the strongest growth in their disposable incomes over the period, thanks in part to a strong UK labor market.
Looking at the poorest fifth of households, she said that lump sum payments for living expenses last year also contributed to higher incomes.
However, these gains were largely offset by the impact of what the report called “regressive tax and benefit decisions”, leading to an overall rise of 13% in disposable income over the period.
The wealthiest households, meanwhile, saw only 2% income growth over the 14-year period, the company said.
The expert group said Eurostat figures, covering a similar but not identical period between 2007 and 2022, suggested the UK fared worse in terms of growth in disposable income than several other leading European countries, including the Netherlands, France and Germany .
“While global economic turmoil has been a major factor, Britain’s recent record is poor both relative to its own history and compared to many of our European neighbours,” said Lalitha Try, economist at the Resolution Foundation.
“What little income growth Britain has experienced over the past 14 years has been mainly due to rising employment, with poorer households benefiting the most,” she said.
The report, entitled Hard Times, was funded by the charity Nuffield Foundation and used data from the Department for Work and Pensions combined with information on employment, wages and housing costs.
It found that absolute poverty had fallen by 3.6 percentage points since 2010, but had fallen by 14 percentage points in the 13 years before 2010.
Relative poverty rates have remained broadly stable over the past 14 years, but the number of children in large families living in poverty has increased, while the number of children in small families living in poverty has fallen.
The BBC has contacted all the main political parties for their comments.
A Lib Dem spokesman said: “People are facing higher mortgages, higher food prices and higher taxes thanks to this government’s inexcusable mismanagement.”
Scottish National Party candidate for Glasgow North, Alison Thewliss, said the report showed “the devastating impact that 14 years of Tory rule has had on people’s lives in Scotland”.
Green Party co-leader Carla Denyer said the report showed “why we need a new generation of Green MPs elected to push a timid Labor government to be braver and bolder in tackling the cost of living crisis”.