Pre-pandemic Britain experienced a mini living standards boom – alongside rising child poverty

Typical household incomes grew at fastest rate since 2001-02 in the year running up to the pandemic, but the proportion of children living in poverty also increased, the Resolution Foundation said today (Thursday) in the response to the latest Households Below Average Income (HBAI) statistics.

The latest data shows that typical household incomes grew by 4.5 per cent in 2019-20, following a slight fall (-0.1 per cent) the year before.

Poverty levels rose slightly in the year running up to the pandemic – with 67,000 more individuals in poverty (14 million in total and 22 per cent of the population).

The number of children living in poverty after housing costs rose by 172,000 to 4.3 million in total (31 per cent of all children, compared to 29 per cent in the previous year). The proportion of children living in poverty is now at its highest level since 2007-08.

The Foundation says that the pre-pandemic mini living standards boom will have been badly needed at the end of the an historically weak decade for income growth. Typical incomes grew by just 8.7 per cent in the 2010s – the worst performance of any decade since records began in 1961.

This long-term poor performance illustrates why so many low-income families have struggled to cope with the Covid-19 crisis, despite the welcome introduction of the furlough scheme and boost to Universal Credit, as they have had fewer financial reserves to draw down upon.

Recent research has found that the poorest fifth of the households are most likely to have been squeezed during the crisis by a combination of reduced income and extra spending pressures, and have been twice as likely to see their debts rise, rather than fall, over the past year.

Karl Handscomb, Senior Economist at the Resolution Foundation, said:

“The UK has experienced an historically weak decade for income growth, so it is welcome that it at least ended with a mini living standards boom. Sadly, the pandemic has put paid to any momentum on income growth.

“However, child poverty also rose in the year running up to the pandemic, and these divides have been exposed over the past year.

“While many higher income households have been able to work from home and increase their savings during lockdown, lower income households are more likely to have stopped working, experienced growing spending pressures, and seen their debts rise as a result.

“As Britain finally looks to emerge from the pandemic, this should remind us of the need to ensure the recovery reaches everyone across Britain – and particularly those who have been hit hardest by the pandemic.