The covid-19 crisis is on track to cut average pay packets by £1,200 a year by 2025, according to new analysis.
The prediction comes from the Resolution Foundation, a think tank focused on improving living standards for people on low-to-middle incomes.
It comes a day after Chancellor Rishi Sunak warned unemployment could surge to 2.6 million by mid-2021. The economic downturn will continue to squeeze living standards in Britain warned the foundation.
“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,” warned Torsten Bell, chief executive of the Resolution Foundation.
Its new research published on Thursday, Here Today, Gone Tomorrow, says that “the combined effects of weaker pay growth and higher unemployment will serve to prolong Britain’s living standards squeeze”.
Households under pressure
Its analysis shows household incomes have been growing at a slower pace even before the pandemic.
They are on course to grow just 10% during the 15 years from the start of the 2008 global financial crisis until 2023.
But household incomes grew by a much higher 40% in the 15 years leading up to the financial crisis.
The Resolution Foundation says further pressure will come next April, when about six million households will lose more than £1,000 through reduced Universal Credit payments.
It also warned the bulk of the government’s extra spending to deal with the “economic emergency” will need to come from tax rises.
“While the priority now is to support the economy, the permanent damage to the public finances mean taxes will rise in future,” added Mr Bell.
Three in a lifetime
“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,” he added.
“The result is an unprecedented 15-year living standards squeeze.”
In Mr Sunak’s Spending Review he pledged £280bn this year to help get the country through the pandemic downturn.
“But which taxes those will be, like which Brexit we can expect, are questions the chancellor left for another day.”
The chancellor told MPs the UK economy is predicted to shrink by 11.3% in 2020, which has been described as the “largest fall in output for more than 300 years”.
Source: bbc.com
