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Household incomes rise as higher employment offsets benefit cuts

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Poverty and inequality in the UK remained stable last year in spite of higher inflation and static benefit payments, according to figures published by the Department for Work and Pensions.

The Households Below Average Income (HBAI) survey for 2016/17 showed rising employment had offset static benefit payments.

Average (median) household net disposable income increased in real terms between 2015/16 and 2016/17. Since their lows in 2011/12, incomes have increased by around £35 per week. The median household income now sits at £25,700 a year for a couple with no children, 1.9% higher than last year.

The DWP said: “2016/17 was a relatively positive year in terms of the UK labour market, with earnings and employment both growing. Inflation was low with CPI around 1% on average. These are likely to be the main factors behind the income growth in 2016/17.”

The proportion of people living in poverty — defined as having an income below 60% of the contemporary median after paying housing costs — remained stable at 22% in 2016/17, largely unchanged since the early 2000s.

Adam Corlett, senior economic analyst at the Resolution Foundation, said: “Today’s household income survey – the most comprehensive we have – shows that typical households saw solid income growth of 2% in 2016/17.

“This very welcome growth was driven by the backdrop of very low inflation and rising employment last year – tailwinds that feel a world away from recent months of above target inflation and high but plateauing employment. While inequality remains broadly flat post-crisis, it is also concerning that relative child poverty has risen for five years in a row – a pattern that risks continuing over the coming years.

“More up-to-date official figures on pay, prices and employment suggest that income growth has since slowed, particularly for poorer households which are most affected by the cash freeze in working age benefits that is saving around £2.5bn in the coming financial year alone.”

Corlett added that getting household income growth back on track was the single biggest domestic challenge facing the government in this parliament.

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