Families Have Lost £2,000 to Inflation and Lower Pay

Families are suffering an “unprecedented collapse” in living standards as high inflation and low wages wipe £2,000 off typical household incomes, research has found.

The Institute for Fiscal Studies has recently said that the delayed impact of the recession would lead to the largest real terms fall in the average income figure for 35 years, as well as bring about the longest slump in family finances on record.

Those in the middle band of earning will suffer a sharper decline in their incomes than those in the poorest levels. It will take until 2015, at the earliest, before the typical household recovers to the same level it was at in 2009, the study found.

Figures produced earlier this month show that families have been ‘tightening their belts’ and spending less from their current accounts on daily items such as groceries and petrol.

This comes as the International Monetary Fund warned that the UK is at a high risk of slipping back into the recession that it has only just come out of.

A report produced by the IFS, it was forecast that the median household income would fall by 7 per cent between 2010 and the 2012/13 period.

This would mean that a couple with two children in the middle-band of society will actually be £2,080 worse off in 2013 than they were in 2010, as their real income falls from £20,056 pa to £27,976 if the IFS are correct.

Meanwhile, the number of children and adults living in poverty is set to rise - as a result to the Coalition’s tax and benefits reform - to more than 10 million as early as 2020.

These findings have been described as “worrying” by social campaigners and analysts alike, who are warning that if these results, are correct it will become “impossible” for ministers to meet their targets to eradicate child poverty by 2020.

This coupled with the staggering figure of over 2.5million people who are unemployed, with women and the under-25s being among the worst affected groups, paints a very dire picture for the financial future of the UK.

Research economist for IFS, Robert Joyce, has said that the “big driver” behind this fall was the real terms decline in earnings.

Mr Joyce went on to say “You could see this as the delayed effect of the recession, real earnings didn’t fall for a while after the economy started contracting, partly because inflation was very low, actually, negative for a while.”

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