Young Families Hit By 'Abrupt' Income Slowdown In Year Before Election - Report

Young Families Hit By 'Abrupt' Income Slowdown In Year Before Election - Report
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A new report has exposed stark divides in the economic experiences of young and old Britons and between renters and home-owners over the year running up to last month's general election.

The Resolution Foundation said that an "abrupt" slowdown in living standards for young and lower-income households provided a "bleak backdrop" for the shock outcome of the June 8 poll, when these groups are thought to have turned against the Government in large numbers to deny Theresa May a majority.

The think tank found that average income growth halved to 0.7% in the year before the election, following a mini-boom between 2013 and 2015.

But young families aged 25-34 were worse hit than others, with average incomes in this group no higher than they were in 2002/03 - a 15-year period which has seen pensioner incomes grow by 30%. Young families were the only group whose incomes have failed to return to pre-crisis levels, said the report.

Incomes among low- to middle-income families grew by just 0.4% over the year, compared to 1% for those in the top half of the income distribution.

By contrast, the top 1% of households enjoyed a "rapid recovery" in incomes, and are now on the brink of having a record share of the nation's income at 8.7%, only fractionally below the 8.9% recorded in 2009/10.

Meanwhile, families in rented accommodation, whether private or social, have experienced little or no income growth in recent years, while home-owners with mortgages enjoyed above-average income growth of 1.7%, according to the think tank.

The slowdown followed a tough decade for the living standards of families on low and middle incomes, which have risen by just 3% since 2002/03, said the report.

After housing costs are taken into account, these families - the "just about managing" identified by Mrs May as a priority when she became Prime Minister a year ago - are "no better off today than they would have been 15 years ago", the think tank found.

Two in five out of this group said they were unable to afford to save £10 a month, while 42% said they cannot afford a holiday away for at least one week per year - up from 37% before the 2008 financial crisis.

The Foundation said the Prime Minister was right to identify the long-term failure to deliver better living standards for the "just about managing" on the steps of Downing Street last year, but said their problems got worse over the following 12 months.

The think tank's senior economic analyst, Adam Corlett, said: "For millions of young and lower-income families the slowdown over the last year has come off the back of a tough decade for living standards, providing a bleak economic backdrop to the shock election result.

"Over the last 15 years and four prime ministers, Britain has failed to deliver decent living standards growth for young families and those on low incomes. Rising housing costs have added further financial pressures.

"The big surprise of the recent election and EU referendum wasn't that many of those families turned out to vote against the incumbents, but rather why it's taken so long.

"This is the big challenge facing Britain today. Not only do we need to get incomes growing again but we need to ensure that that growth is spread evenly across the country, across generations and between rich and poor."

The Foundation found that the swelling fortunes of the top 1% have been the driver of rising inequality since the mid-1990s, with inequality among the remaining 99% of the population falling over the same period.