Pay packets to fall £1,200 a year by 2025
Britain is already going through a 15-year squeeze on living standards and the coronavirus pandemic is likely to prolong this further, Resolution Foundation said.
It said Covid is causing immense damage to public finances and permanent damage to household finances due to the effects of weaker pay growth and higher unemployment.
As such, its Here Today, Gone Tomorrow report revealed that by the middle of this decade, average wages are on track to be £1,200 lower than forecast pre-pandemic.
It calculates that household incomes are on course to grow just 10% in the 15 years since the start of the financial crisis in 2008, compared to the 40% growth seen in the 15 years leading up to the crash.
The stark figures come a day after the chancellor’s Spending Review where the government would not budge on keeping the £20 a week Universal Credit uplift. As such, around six million households will lose over £1,000 in support overnight from April, just when unemployment is due to peak.
Torsten Bell, chief executive of the Resolution Foundation, said: “The Covid crisis is causing immense damage to the public finances, and permanent damage to family finances too, with pay packets on track to be £1,200 a year lower than pre-pandemic expectations.
“The pandemic is just the latest of three ‘once in a lifetime’ economic shocks the UK experienced in a little over a decade, following the financial crisis and Brexit. The result is an unprecedented 15-year living standards squeeze.
“Yesterday, the chancellor chose to ramp up his Covid spending to £335bn. But he also quietly dialled down his spending plans beyond the crisis. For all the talk of ending austerity, its legacy will continue for many public services throughout the parliament.
“While the priority now is to support the economy, the permanent damage to the public finances mean taxes will rise in future. But which taxes those will be, like which Brexit we can expect, are questions the chancellor left for another day.”