Britain is on course for one of the worst periods of income growth since records began. Real household disposable income is set to rise by just £220 from 2019 to 2024, a lift of just 1%.
The hit to household income emerges amid a growing outcry over the plight of 2.9 million self-employed workers who say they are facing “a miserable Christmas period” after being excluded from the government’s financial aid schemes. The groups who have not been helped include the newly self-employed, directors of small limited companies, self-employed workers who have earned £50,000 or more in trading profits in recent years and certain types of freelancers. As many as one million people in the UK are planning to give up being self-employed after seeing their earnings decimated by the Covid-19 pandemic. A report from the London School of Economics found that a two-decade-long trend in favour of more people working for themselves was now under threat.
The Resolution Foundation thinktank, based on official figures, highlights how long the economic scarring from the pandemic will take its toll on household finances. It concluded that it would mark the second worst parliament for income growth since 1955, when records began. Only the 2015-17 parliament, when incomes actually fell by 0.1% a year, has a worse record.
Unemployment set to peak at 2.6 million in mid-2021 and remain high long after the pandemic is over, the foundation said. It warns that a plan to cut universal credit and tax credits in April would see around six million households lose more than £1,000 a year.
Adam Corlett, principal economist at the Resolution Foundation, said: “On Wednesday the chancellor warned that the economic emergency was just beginning – and that’s true of both the public and household finances..."