Half of UK families £110 worse off a year

Two years on from the general election, new analysis shows that the top five per cent of families have gotten richer by £3,300 a year, while the poorest 50 per cent have had their incomes squeezed by £110.

The New Economics Foundation says that as result of the findings there are 300,000 more families in poverty in December 2021 compared with 2019.

The gap in incomes across regions has also widened in the last two years according to NEF, with places supposed to benefit from the government’s ​‘levelling up’ agenda worst hit. For example, on average, incomes in the north-east have risen by less than £20 a year, whilst in London, incomes have increased by more than £600 a year.

NEF argues this sharp increase in inequality has been driven by the government’s pandemic response, which has more recently left poorer families exposed to global price rises and inflation. The design of emergency Covid-19 measures resulted in less support, on average, for the poorest. While furlough protected millions of jobs, those with less secure employment were more likely to fall through the cracks. At the same time, the UK had one of the weakest social security systems among advanced economies going into the pandemic, and the universal credit uplift was much less generous than top-ups seen in other in other countries.

Alfie Stirling, director of research and chief economist at NEF, said: “These results show that the government’s handling of the pandemic has led to the richest families and regions getting richer, while the poorest families are even poorer. With prices expected to continue increasing, the threat of a rise in interest rates and ongoing effects of Brexit, things could get a lot tougher for families that have already suffered most.

“In the long run, any agenda to tackle these issues needs to grasp the fundamental drivers of regional inequalities for places, people, and industry. But in the short term, more should be done to help families through the social security system. NEF’s proposal for a Living Income would ensure an income floor that reflects the true cost of living for families.”