HOUSEHOLD incomes have dropped by an average of £360 a year since 2008 -- after accounting for inflation -- the influential Institute for Fiscal Studies (IFS) revealed yesterday.
This is the largest decline in living standards since 1980 to 1983, the IFS said. Usually household incomes rise above the level of inflation, by around five per cent every three years.
Those on high incomes are being hit hardest, due to tax hikes. “Someone in the middle of the richest tenth in society in 2011 will be about £2,200 less well-off than someone in that position in 2008,” the report said.
Overall, low interest on savings and sub-inflation wage growth are the main reasons behind the recent squeeze on living standards, it said.
Inflation hit four per cent in January and is expected to have risen further in February. The latest figures on price pressures are released today.
Inflation has become the leading concern for investors and the general public, according to research from the Association of Investment Companies (AIC) released yesterday.
Escalating prices have become more of a concern to people than worries about job loss or rising interest rates, AIC’s survey showed.
Today the Adam Smith Institute thinktank will accuse the government of cashing in on spiralling inflation through the tax system.
Capital gains tax – which rose from 18 per cent to 28 per cent in last June’s budget – will claim an extra £1.6bn due to inflation, the institute argues.
And rising prices have knocked the recovery in construction, according to the Federation of Master Builders. Nine out of ten surveyed building companies expect material prices to rise even further in the next six months.