Trades Union Congress says 2010-2014 unique in seeing drop in real household disposable incomes, which combine wages, benefits, taxes and inflation.
The coalition government has presided over the worst five-year period for living standards since modern records began more than half a century ago, according to the Trades Union Congress.
In an analysis based on data from the Office for National Statistics, the TUC said the 2010-2014 period was unique in seeing a drop in real household disposable incomes.
Conservative plans for extreme austerity after the election risk killing off the recovery again
Frances O'Grady, TUC
RHDI – a yardstick of living standards that takes account of incomes, benefits, taxes and inflation – was 0.6% lower in the half-decade ending in 2014 than in the five years ending in 2009, when it rose by 6.9%.
The TUC said the record for living standards had been even more disappointing over the past five years than it had been during the period from 2008-12, which included the worst recession the UK suffered in the post-war era.
A combination of factors has led to a squeeze on disposable incomes in recent years. Until recently, pay awards have been running behind inflation, tax increases cancelled out tax cuts, and benefits have been reduced.
Living standards are a key battleground in the general election campaign and in last month’s budget, George Osborne said on this same measure they would be on course to be higher in 2015 than when the coalition came to power five years earlier. The two measures differ because the chancellor was comparing a forecast with RHDI for the end of this year with RHDI in 2010, while the TUC is comparing an average of RHDI per head between 2010 and 2014 with an average of the previous five years.
But the TUC said government policy had been responsible for the weakness of the RHDI. It said austerity had been more to blame for the drop in living standards than the financial and economic crisis of 2007-09, and that “deep and rapid cuts” had choked off recovery.
Frances O’Grady, the TUC’s general secretary, said: “Living standards have suffered the worst slump in at least half a century, leaving workers paying a heavy price for the government’s bad choices over the last five years. Austerity has failed, there’s still a major deficit, jobs are less secure and workers’ living standards have fallen.
“We need a government that understands how important pay growth and secure jobs are for a strong economy. If workers don’t have decent wages in their pockets to spend, businesses will struggle to invest and grow,” O’Grady added.
“Conservative plans for extreme austerity after the election risk killing off the recovery again. It would be Groundhog Day for living standards, making families worse off and cutting public services down to a stump.”
Modern records for living standards date back to 1960. According to the ONS data, the strongest five-year period for growth in RHDI was 1988 to 1992, when it was almost 21% higher than the average for the previous five years.
The fall in living standards in the run up to the 2015 general election contrasts with strong growth at the same stage in previous parliaments.
In the five-year period ending in 2009, the year before the 2010 election, RHDI was 6.9% higher than it had been on average in the five years ending in 2004. John Major could boast of a 15.4% increase in living standards in the five years ending 1996 compared to the five years ending in 1991.
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