Average income makes slow return to pre-crisis levels

Figures from the Institute for Fiscal Studies (IFS) show that the average household income has climbed back up to pre-recession levels, but wages are still lower than the highs experienced in the 2009/10 financial year.

IFS said the average income is still 2% lower than the peak it experienced at the start of the decade.

The study noted that incomes for working age people were still below their 2007-08 level, after adjusting for the impact of inflation, and only the over-60s will have higher incomes this year than 2007-08.

Living standards have risen more slowly than after previous recessions, said the IFS.

Real median income has grown by 1.1% over the course of 2014/15 – hitting roughly the same levels as in 2007/08. However, incomes recovery has been hampered by government policies, said the research.

The IFS said: "Tax increases and benefit cuts, implemented as part of the government's deficit reduction plan, have also reduced incomes."

IFS director Paul Johnson told Radio 4: "It's astonishing actually that seven years later incomes are still no higher than they were pre-recession and indeed for working-age households they're still a bit below where they were pre-recession."

Cathy Jamieson MP, Labour's Shadow Financial Secretary to the Treasury, said people are not as well off since the coalition government came to power.

She said: "This report confirms that working people are worse off since 2010. This is set to be the first time since the 1920s that people are worse off at the end of a Parliament than at the start.

"Labour's better plan will deliver the rising productivity we need to get sustained rises in living standards for all."

Labour has certainly played on the fact the economic recovery has been selective and that wages have stagnated - especially with the election in sight. However, the IFS noted that it is "almost certain that incomes would have fallen significantly under any government".

"It would therefore be misleading to attribute all trends in living standards before May 2010 to Labour, and all trends since then to the coalition," said the study.