The real cost of the economic downturn to Britain's 'squeezed middle' revealed

The average income of a household has fallen from £37,900 to £32,600 ONS figures show

The average income of a household in the “squeezed middle” has fallen from £37,900 to £32,600 since the economic downturn, official figures show.

The Office for National Statistics (ONS) revealed a stark difference in the disposable incomes of retired people and those of working age. In the four years after the financial crisis started in 2007-08, the median income for households dropped overall by 3.8 per cent after inflation. But retired households saw their income rise by 6.1 per cent, while the non-retired suffered a 5.6 per cent fall.

The disparity will reopen the debate about whether better off pensioners should continue to receive universal benefits in the “age of austerity”. David Cameron has resisted pressure to review winter fuel allowances, free bus passes and TV licences because he promised to keep them during the 2010 election campaign.

Average earnings from employment and investments for the middle fifth of non-retired households on the income ladder fell from £37,900 to £32,600 between 2007-08 and 2011-12. State benefits for this group rose from £3,100 to £4,600 over the same period. Average direct taxes paid by them fell from £8,700 to £6,800 while indirect tax payments dropped from £6,400 to £6,000.

The Resolution Foundation think tank, which studies low and middle income groups, said the statistics confirmed that the major slowdown in wages and incomes began before the recession.

Matthew Whittaker, senior economist at the foundation, said: “The figures suggest that for many households, a combination of this slowdown and a general fall in incomes since the financial crisis of 2008, may have cancelled many of the gains made in earlier years when incomes and per capita GDP were broadly rising in tandem.”

He added: “The figures also reveal a dramatic generational difference - with the incomes of working-age households falling by more than  six per cent since 2008 while those of retired households have continued to rise. The pre-crisis slowdown is likely to have been even starker if we looked only at working age households.”

Catherine McKinnell, a Labour Treasury spokeswoman, said: “These figures show that disposable incomes for the average working-age household fell by over £1,500 a year in David Cameron's first two years in Downing Street. And after three damaging years of flatlining the cost-of-living crisis under this Government continues as prices are still rising much faster than wages.”

Conservative sources pointed out that that incomes started to fall under Labour. A Treasury spokesman said: “We have been clear that the country was made poorer by the economic and fiscal crisis but the only way to raise living standards is to grow the economy and stick to our long-term economic plan that is creating jobs and growth.”

The Treasury believes that the link between economic growth and wages has not been broken, giving ministers some ammunition against Labour's claim that ordinary people are not reaping any benefit from the recovery. New Treasury research has raised ministers' hopes that the public will feel better off before the 2015 election.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Team Leader

Negotiable: Recruitment Genius: A Team Leader is required to join one of the l...

Recruitment Genius: Chef

Negotiable: Recruitment Genius: A Chef is required to join one of the largest ...

Recruitment Genius: Customer Service Assistant

Negotiable: Recruitment Genius: A Customer Service Assistant is required to jo...

Recruitment Genius: Refrigeration and Air Conditioning Service Engineer

£25000 - £28000 per annum: Recruitment Genius: A successful national service f...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor