After several years of stagnation, Britain’s economy is growing. But what’s happening to living standards? Are they rising too?
Labour says the answer is No. The Tories emit conflicting messages. On the one hand they concede most people are now worse off and seek to pin the blame on “Labour’s recession”.
But more recently Cameron and his lieutenants have claimed that real wages for everyone except the richest are rising if one factors in their tax cuts.
So who’s right? As the Institute for Fiscal Studies has shown, it’s spurious to just analyse wages to measure living standards. One has to factor in taxes, inflation, benefits and patterns of consumption.
What the IFS’s latest analysis shows is that on the broadest measure, living standards fell for most people during the Great Recession. It also suggests that living standards for those in the middle might have stopped declining in 2013-14, mainly thanks to a fall in inflation.
If inflation stays subdued, things will probably continue to improve for people in the middle over the coming year. But the Coalition’s benefit cuts will keep a lid on incomes for the poor.
And, as the IFS has said before, the likelihood is that average incomes will still be lower at the time of next year’s general election than at the last one in 2010. Whoever they choose to blame for it, many voters will be no better off than they were five years earlier.
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