Debt help need may grow as Britons ‘face biggest income squeeze since war’

Posted by Paul Thacker

A new study has said Britons are facing the biggest squeeze on incomes since the second world war, with the real terms decline in standards of living set to continue until at least 2013.

The Institute for Fiscal Studies (IFS) has published a report comparing Britain’s living standards with those of other nations since the start of the recession, with the actual contraction of the economy being around mid-range in size at six per cent.

It noted that the immediate impact of the recession was limited by government action that ensured incomes continued rising in the short term, but concluded that this simply meant the pain was “delayed rather than avoided”.

Instead, it noted, Britain faces a bigger task than most in getting its public finances under control and as this happens, consumers will see real incomes continue to fall, with no increase until the 2013-14 financial year.

The IFS put the figure for this decline in the last financial year at 3.5 per cent, the biggest fall since 1981 and taking consumer wealth back to the level it was at in 2003-04.

Research economist at IFS Robert Joyce said: “As in other developed countries, the most severe consequences of the recession on UK living standards have only just begun to be felt and will continue to be felt for years to come.”

Such a situation could place a major strain on those already struggling to pay their debts back, while pushing others into debt.

The study comes at a time when the UK and other advanced economies are also at risk of slipping back into recession, according to a report published last week by the Organisation for Economic Co-operation and Development.