Family incomes 'will start to rise from next year'

Middle-income earners and poorer families are set to benefit most from the first rise in real income since the credit crunch struck, research suggested yesterday.

The Centre for Economics and Business Research (CEBR) predicts that families will enjoy an increase in income next year as the high inflation of the past four years recedes.

Middle-income households can expect a one per cent rise while poorer households can look forward to an even bigger increase, 1.5 per cent. The UK's richest households will see a 0.7 per cent rise. The news came as Sir John Major said data showed the UK's economic recovery had begun.

Speaking on the BBC's The Andrew Marr Show, the former Conservative Prime Minister likened today's economy to that of the early 1990s when his Chancellor, Norman Lamont, was mocked for claiming he could see the "green shoots of economic spring".

"Norman Lamont was taken to pieces by commentators for suggesting there were green shoots, but in retrospect we can see that Norman was right," Sir John said. "Recovery begins from the darkest moment. I'm not certain, but I think we have passed the darkest moment."

Sir John, who oversaw one of the bleakest periods in UK economic history, also pointed to "oddities" within economic data.

"Why in the depths of this recession is employment growing? Why is industrial production going up? Why has the stock market risen?" he asked. "There are things happening out there that will become apparent and we don't quite know why or how. My guess - and this is something a minister can't say but I can - is that in due course we will find that we have passed the bottom."

Real incomes for middle-income and poorer households have fallen every year since 2008 and are set to drop again this year by 0.2 per cent due to slow wage growth and high inflation. However, the forecast by the CEBR suggests Sir John's claim that the worst is over could be correct, with 0.5 per cent growth expected for next year, and similar increases predicted for 2014 and 2015.

CEBR economist Daniel Solomon said: "There is finally a glimmer of light at the end of the tunnel for retailers, after four barren years. Conditions will still be tough, just slightly easier than before."