The average household’s weekly income measured £682 in 2004-05 and just £683 in 2009-10, in numbers adjusted for inflation.
Although the figures for 2009-10 are the latest available, the situation will have only worsened in the 13 months since the coalition took power. Earlier this year, Bank of England governor Sir Mervyn King warned of the biggest income squeeze on families since the 1920s.
Real disposable income plummeted by 2.7 per cent in the year to the end of March – the sharpest drop since 1977 – official statistics showed last week. And inflation currently stands at 4.5 per cent on the consumer price index – far higher than the bank’s two per cent target.
The collapse in income growth coincided with falling popularity for the Labour government and its removal from office last year. The Centre for Policy Studies (CPS), which compiled the figures, will urge current chancellor George Osborne not to succumb to the same fate.
With Britons’ wallets squeezed by rising prices and a sluggish economy, Osborne must deliver faster growth if he wants to avoid electoral defeat in 2015, the CPS will argue.
The CPS, co-founded by Margaret Thatcher in 1974, will quote Ronald Reagan in its plea to the chancellor, ahead of the unveiling of a statue of the ex-US president in Grosvenor Square this morning. In 1980, the American presidential debates were transformed when Reagan asked the audience: “Are you better off now than you were four years ago?”
“If the answer to Reagan’s question is to be ‘yes’ in 2015, then a robust strategy for growth and the containment of inflation are both essential,” said CPS director Tim Knox.
In Labour’s two terms in office up to 2005, real incomes rose 3.1 per cent and 2.1 per cent a year respectively – leading to electoral success, the CPS said. Yet income growth in Labour’s third term was just 0.04 per cent a year.
The CPS demand comes as some Conservatives are pressing for the government to combine its commitment on deficit reduction with strong supply-side reforms, echoing similar statements from business groups such as the Confederation of British Industry and the Institute of Directors.
Tim Montgomerie, head of the blog Conservative Home and former aide to Iain Duncan Smith, told City A.M.: “When Greece defaults, that’s the time for Osborne to announce measures that will reassure investors in Britain: restructure the tax system, release banks from onerous capital requirements, and modernise strike law.”