UK household incomes fall for fifth consecutive year
The impact of inflation and Government cuts was laid bare today by research that revealed average disposable incomes fell for the fifth year in a row.
A survey in the Bank of England's quarterly bulletin painted a bleak picture of the UK in the age of austerity, with disposable incomes having dropped by an average £46 a month to £720 in the past year. The figure has fallen every year since 2007.
Some 56% said their wages failed to keep pace with the rising cost of bills, which were driven higher by rising food and utility prices and the hike in VAT to 20%. Just 13% said they were better off.
The survey also highlighted the struggle many face to get by, with 12% having faced difficulty paying for their accommodation in the past year as they battled rising bills and rents.
The Government's austerity measures had also taken their toll, with nearly half those questioned saying the cuts had hit them in the pocket over the past year, and more than two-thirds expected to feel the pain in the future.
The squeeze in real income and the concerns about the future partly explain the fall in consumer spending that is hurting the UK's economic growth, helping push it to the brink of another recession.
The report said: "Over the past year, the recovery in the UK economy appears to have slowed. That weakness in the UK demand has been driven by falling consumption, reflecting the challenging environment facing households."
The proportion who said they had fallen behind on some or many bills nearly doubled to 7.5%, compared to 4.1% a year ago. And about 10% of households admitted taking hand-outs from family or relatives.
There is increasing uncertainty about the future, with 31% saying they were less sure about what their income would be compared to how they felt a year ago. Only 9% felt more certain.
Half of households said they had changed their behaviour as a result of the Government's austerity measures, with typical action including looking for another job or asking for longer hours.
Credit conditions remained tight, with a larger percentage finding it harder to borrow than a year ago.
Two-fifths of households reported they did not save anything on a monthly basis - a higher level than last year, with the report suggesting that many households may not have any spare money to set aside.
The record low interest rates of 0.5% had helped borrowers, as had leniency by lenders, but levels of financial distress remained elevated.
Of households on variable rate mortgages, a fifth said they would struggle to pay the bills after a rise in rates of just one percentage point.