In the financial year that ends on April 5, real household median incomes in the UK will at last regain the levels of 2007-08. So forecasts the Institute for Fiscal Studies. Does this mean the UK’s “standard of living”[PRIMARILY A UK DEBATE? OR BEYOND?] debate should be over? No: it is very much alive, not just with respect to the past but also with respect to the future.
The striking feature of the IFS analysis is the weakness of recovery. Real median incomes are estimated to have fallen by 4 per cent between 2009-10 and 2011-12. This is not exceptional: they fell by 7.3 per cent between 1973 and 1977 and 5.7 per cent between 1980 and 1982. But real median incomes are forecast to rise only 1.8 per cent in the three years after 2011-12, against 13.2 per cent and 9.2 per cent in the three years after the troughs of the 1970s and early 1980s. The recovery in living standards has been very weak this time. This, not the severity of the post-crisis decline, largely explains the stagnation.
It is important to understand what the numbers used by the IFS mean. They show household incomes after tax and benefits. But they exclude publicly provided services, such as health and education. This is an important qualification, since the latter also affect standards of living, properly measured.