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Income growth slows for all UK households

Joanna Faith
Written By:
Joanna Faith

Income growth slowed for all households in the UK last year, but the slowdown was most acute for lower income families, according to a report by a leading think tank.

A typical middle income household saw growth of just 0.9%, the weakest since 2012, and a marked slowdown from the 1.6% rise in 2016/17. This is also below the 2.5% average in the decade before the financial crisis.

But disposable incomes fell for the poorest 30% of households by 0.3%, the Resolution Foundation said. These families are between £50 and £150 worse off now thanks to a combination of benefit freezes and above-target inflation.

The report also said child poverty in the UK is rising twice as fast as government figures suggest.

The proportion of children living in poverty grew by 21% between 2011 and 2016, rather than 11% stated in official figures.

Child poverty is projected to have increased last year by around 3%, reflecting a broader trend seen since 2011. The think thank said this was driven by benefit cuts that particularly hit low income families, including the 3% real-terms fall in the value of tax credits and child benefit.

The report said official figures are likely to understate the recent rise in child poverty because of large under-reporting of benefit income. Almost one in every five pounds of benefit spending is not taken into account in official poverty figures.

Adam Corlett, senior economic analyst at the Resolution Foundation, said: “Reducing child poverty has been a goal of politicians from all parties in recent decades. But our analysis shows that child poverty is likely to have risen last year, and that rises since 2010 have been underestimated in official government data.

“Our analysis shows how important cash benefits like tax credits have been for supporting just about managing families and tackling child poverty since the millennium.

“It’s vital that government and other policy makers understand the positive impact that cash transfers have on low-income families, not least as they are in the middle of a huge multi-year programme of over £14bn worth of benefit cuts. The risk is that, unless the lessons of the past are learned, the future could spell squeezed incomes and further increases in child poverty.”