Half of UK families have seen their disposable incomes shrink in the last two years, new analysis suggests.
A report by a left-of-centre think tank says that the poorest half of the population have had their incomes squeezed by £110 since 2019. The New Economics Foundation (NEF) also says that the richest 5% are better off by £3,300 a year. Incomes in regions such as London have risen six times faster than those in the north east.
As a result, the think tank has called into question the success of the government’s “levelling up” policy, which aims to improve standards of living and productivity in areas of the UK that have traditionally been “left behind”. The Department for Levelling Up, Housing and Communities, did not immediately respond to the BBC’s request for comment.
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In 2019, the pledge may have helped the Conservatives win votes in the so-called “red wall” region in the north of England that traditionally elected Labour MPs.
The NEF analysis found that in the two years since the election, the poorest 50% of the population in every region apart from London and the east of England saw their incomes squeezed by an average of £110 per year, after accounting for increases in the cost of living.
As a result, the gap in incomes across regions has widened, with areas along the “red wall” worst hit. Disposable incomes in the north east of England have risen by just £20 a year on average, or 0.1%. In the south east of England, however, incomes have jumped by £550.
‘Things could get tougher’
Single parents were the worst affected families across all regions. Those in Yorkshire and the Humber and the north west and Merseyside saw their incomes fall by around 15 times as much as those in London.
“With prices expected to continue increasing, the threat of a rise in interest rates and ongoing effects of Brexit, things could get a lot tougher for families that have already suffered most,” said Alfie Stirling, director of research and chief economist at the NEF.
He added that more could be done to help families in the short term, such as introducing a minimum income floor which better reflects the true cost of living. Prices are already going up at a relatively rapid rate on a variety of items and services due to ongoing labour shortages, supply chain issues and extra red tape after Brexit.
At the time of the Budget in October, the government’s independent forecaster, the Office for Budget Responsibility, warned that the cost of living could rise at its fastest rate in 30 years.
The Chancellor, Rishi Sunak, and the governor of the Bank of England, Andrew Bailey, have acknowledged that household budgets are strained. Mr Bailey has even apologised for the situation. “None of us want to see that happen,” he said in November.