Household incomes will not return to their pre-crash levels until early 2016 – later than official forecasts – an economic think tank is warning.
The Resolution Foundation said that while it expects real household incomes to grow steadily during the course of 2015 – they will still not match the pace of growth seen in the early 2000s.
According to its analysis, incomes can be expected to rise by 1.7% over the course of the year, meaning that they are unlikely to regain the level they were before the crash of 2008 until the early months of 2016.
That contrasts with official estimates in the national accounts – based on figures from the Office for National Statistics (ONS) – which suggest a return to pre-crisis income levels by the middle of next year.
The Resolution Foundation has, however, challenged the way the ONS measures real household disposable income (RHDI) – in part because it includes the incomes of several non-household organisations, such as universities, charities and trade unions.
It has also questioned the way that the ONS calculates the impact of inflation on household incomes.
Resolution Foundation chief economist Matthew Whittaker said: “Household incomes are arguably the best measure of living standards. Timely and accurate data is therefore vital for making informed judgements on an issue that will feature heavily in the upcoming election.
“Unfortunately the official figures – and how they are reported – provide a potentially misleading impression of what’s been happening to households.
“Our own measure of household incomes remains imperfect – providing no sense of variation in experience across the distribution – but it better captures the true position of British households than the measure that usually gets reported.”
According to the Resolution Foundation’s measure, household incomes have risen very slightly – by £130 – from a low of £16,940 per head in late 2013, but still remain £600 (3.3%) below their pre-crisis peak.
“After years of stagnation it’s encouraging that household incomes are set to rise again through 2015. But household income per capita is still almost £600 lower than it was at the start of 2008 – and this shortfall doesn’t look like being made up until early 2016,” Mr Whittaker said.
For Labour, shadow treasury minister Shabana Mahmood said: “These figures show that working people will be worse off at the time of the next election than when the Tories came to power.
“Working people can’t afford five more years of David Cameron’s Tories.”
A Treasury spokesman acknowledged that the impact of the recession was still being felt in the economy but said the situation was improving.
“The Government’s long-term economic plan is working, with more people in work than ever before, wages rising above inflation for the past two months and those in work for a year or more seeing their pay rise by over 4%,” the spokesman said.
“The job is not done, so we need to go on working through the plan that’s securing a resilient economy and better future.”