Weak income growth – widespread for richer and poorer people, older and younger people – has been with us since the Great Recession. Much of this poor growth has been replicated in other countries as the world has had to cope with the fallout from the financial crisis, COVID, and energy price rises. Even so the UK has been falling behind most other countries, including since 2019.
In new IFS research released today, funded by the abrdn Financial Fairness Trust, we set out seven key facts that summarise trends in households’ living standards. We focus on the trends since 2009–10 (the last year of the last Labour government) and over the course of this parliament (since 2019–20)
Key findings
- Nearly half (47%; 3.7 million) of all households affected by the UC reform gain at least £200 per year. One-fifth of affected households (21%; 1.7 million) see their income change by less than £200 per year, while nearly a third (32%; 2.5 million) are worse off by at least £200 per year.
- Many see considerably more substantial income changes. 25% (2.0 million) of affected households are better off under UC by at least £2,000 per year, with half of those better off by more than £4,000 per year. Conversely, 21% of affected households (1.6 million) are worse off under the legacy system by at least £2,000 per year, with close to half of those worse off by more than £4,000.
- Couples with children are the most likely to gain under UC compared with the legacy system. 72% gain by at least £200 a year, compared with just 22% who lose out by at least that much. Households in work and renter households also tend to gain as benefits are typically withdrawn more slowly as earnings rise under UC.
- Most households with one adult above and one adult below state pension age are significantly worse off under the UC system than under legacy benefits. Because the reform means they are entitled to UC – rather than the much more generous pension credit – 70% of these households (180,000) lose out by more than £4,000 per year under the UC system. Households with over £16,000 of assets and the self-employed can also lose out significantly under the UC system.