Research by the Institute of Fiscal Studies, the UK’s main economic forecaster, said for those on middle and higher incomes, falls in real income happened largely between 2009-10 and 2011-12 because real earnings fell sharply. By contrast, it said many poorer households were initially relatively protected by the benefits system.

However, for those on lower incomes, more dependent on income from the state, falls in real income will happen largely as a result of welfare cuts that began after the initial recession and are continuing up to and beyond 2015-16.

The IFS said income inequality fell substantially between 2007-08 and 2011-12, but is projected to rise again from 2011-12, almost – but not quite – reaching its pre-recession level by 2015-16.

The research found that the income of the lowest 10% of earners will have increased by 3.4% less than inflation between 2007-08 and 2015-16, compared to 5.4% for middle earners and 5.5% for the top 10%.

Robert Joyce, a senior research economist at IFS, said: “If the OBR’s macroeconomic forecasts are correct, then most of the falls in real incomes associated with the recession have now happened for middle and higher income groups. But much of the pain for lower income groups is occurring now or is still to come, because these groups are the most affected by the ongoing cuts to benefits and tax credits. Overall, we expect the period of recession followed by austerity to leave income inequality in 2015-16 about the same, or slightly lower, than in 2007-08.”

Sponsored

Wellness and wellbeing holidays: Travel insurance is essential for your peace of mind

Out of the pandemic lockdowns, there’s a greater emphasis on wellbeing and wellness, with

Sponsored by Post Office