Income growth under the Tories has been the “worst in generations”, the Institute for Fiscal Studies (IFS) has said, as households are squeezed by a growing tax burden.
The average Briton would be almost £5,000 richer if living standards had grown at the rate recorded in the 50 years prior to the Conservatives coming to power in 2010, the IFS said.
A single person with no children had an average disposable income of £21,537 in 2022-23, compared with £20,339 in 2009-10, when adjusted for inflation. However, the IFS said this figure would be £4,961 higher at £26,498 if incomes had grown by the pre-recession average.
Britain’s highest earners have been the worst hit, the IFS added, as a combination of lower wage growth and higher taxes meant that income growth for this cohort was just 1.5pc in the 13 years.
Mubin Haq, chief executive of Abrdn Financial Fairness Trust, which funded the report, said: “The danger is that stagnation becomes the new normal. This is in no one’s interests and stunts too many futures and too many lives. Key to any future government will be a renewed drive to tackling hardship and improving living standards.”
Under the Tories, the UK has dropped to recording some of the slowest income growth for working age adults among developed countries, the report said.
While UK wages climbed by just 6pc between 2007 and 2019, wages in the US and Germany climbed by 12pc and 16pc respectively.
Tom Waters, of the IFS, said: “Poor income growth has been an unfortunate feature of economic life in the UK over the last 15 years. And it has been slow growth for essentially everyone; rich and poor, old and young.
“The UK has fallen from being one of the fastest growers prior to the Great Recession, to one of the weakest performers.”
Mr Waters called for reforms to taxes, planning and education to help boost productivity.
The National Institute of Economic and Social Research (Niesr) warned on Thursday that a surge in people dropping out of the workforce owing to long-term sickness since the pandemic is holding back growth.
The think-tank said living standards have fallen 7pc since the last election and will only surpass 2019 levels by 2028-29.
It expects the UK will struggle with sluggish growth of 1pc a year for the remainder of the decade.
Benjamin Caswell, of Niesr, said: “We can’t ignore the fact that there’s been this huge negative labour supply shock, and this clearly has implications for labour market tightness, which we saw spike quite recently over the last couple of years. It also has implications for wage inflation.”
It came after official data showed middle-class mortgage holders are being hit hardest by the cost of living squeeze.
High interest rates meant mortgaged homeowners suffered a 5.5pc increase in living costs in the year to March, the steepest increase of any household group in the country, according to the Office for National Statistics (ONS).
By contrast, renters and mortgage-free homeowners saw their costs rise by 4.6pc and 3.3pc respectively.
High-earning households also saw their costs rise by 5pc in the year to March, while low-earning households saw their outgoings rise by only 3.9pc.
The figures show how the worst of the burden of the cost of living crisis has shifted from poorer families to wealthier households as headline inflation cools but the burdens of high interest rates and high mortgage rates remain.
In the year to March, mortgage interest payments increased by 36.1pc, while electricity, gas and fuel prices fell by 18.3pc.
Overall UK household cost inflation (HCI) has been falling steadily since it peaked at 12.7pc in October 2022, and cooled to 4.4pc in March.
However, it was still far higher than the headline 3.2pc rise in the consumer price index (CPI) in March, which did not include increases in housing costs.
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