UK Living Standards Lagged Most Wealthy Nations Under Tory Rule

Tom Rees
·3-min read

(Bloomberg) -- Britain’s ruling Conservative Party presided over living standards that lagged most wealthy nations since it took office in 2010, a period where household finances have been battered by a series of international and domestic crises.

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The Institute for Fiscal Studies estimated that real household disposable incomes grew by just 5.9% between 2009-10 and 2022-23. That’s well below the 30% growth that would have been expected if trends from the prior half century continued.

Separately, the National Institute of Economic and Social Research found that a 7% fall in living standards in the current parliamentary term was one of the worst since records began.

A post-financial crisis stagnation in living standards has been seen across the developed world. However, Britain suffered one of the worst inflation spikes and has also been buffeted by numerous crises, including its exit from the European Union and Liz Truss’s disastrous budget plans during her short term as prime minister. The analysis suggests the UK slipped down the international table on gains in living standards.

“It has been slow growth for essentially everyone; rich and poor, old and young,” said Tom Waters, associate director at the IFS. “This means that even while income inequality has been stable, progress on reducing absolute poverty has been painfully slow.”

The figures underscore the challenge facing Prime Minister Rishi Sunak as he attempts to win back voters ahead of the general election on July 4. The economy’s performance under the Tories is in sharp focus for voters after last year’s recession, double-digit inflation and market turmoil triggered by Truss.

In the first week of the campaign, the Tories released a slew of policies, including national service and tax cuts for pensioners, in a bid to reduce the opposition Labour’s 20-point lead in opinion polls.

The IFS found that the UK has slipped down the international table on growth in disposable incomes. It has fallen from one of the best performers in the developed world just behind Ireland and Norway before the financial crisis to one of the worst between 2007 and 2019 — above just France, Spain and Greece.

The IFS analysis also revealed that absolute poverty has fallen by 3.4 percentage points since 2009-10, only of a fifth of the 16.2 point tumble seen in the previous 13 years.

NIESR found that living standards have tumbled 7% since the 2019 election. For the poorest 10th of households, the fall is greater at 20%, a “devastating” hit, its research lead Arnab Bhattacharjee said.

“This 7% fall over the parliamentary term is among the largest falls since records began, that is since the 1950s, but almost the same magnitude as the 1974 elections,” he said.

Bhattacharjee added that the bottom 40% of households will not see living standards recover to pre-pandemic levels until 2028, as “we also see the economic growth rate as being anemic into the foreseeable future.”

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