Average family will be £7,000 worse off by 2015 thanks to economic crisis



Every family in Britain will be worse off by more than £7,000 by 2015 as a result of the economic crisis, new figures have revealed.



A House of Commons analysis has found that lower wages and high unemployment has badly hit household disposable income.



Last year, the average UK family was £800 out of pocket compared with 2010. But by 2015, this is set to more than double to £1,700 per year.

Feeling the crunch: The average family in Britain will be £7,100 worse off by 2015 (posed by models)

Over the lifetime of this Parliament, the average family will have a total of £7,100 less to spend between 2011 and 2015.

The analysis, based on official Government figures, highlights the nightmare facing families. The Bank of England has warned that households are facing a ‘ferocious’ squeeze on take-home pay.



Since records began in in 1948, ‘real’ disposable income, which means it has been adjusted for inflation, has risen almost every year. But the figures show that this is now dropping dramatically.



Pessimistic: Governor of the Bank of England Mervyn King has warned Britain is not even halfway through the economic crisis

As well as wage cuts, families have also being hit with rising energy, fuel and food bills.



The figures came as Bank of England governor Mervyn King warned that Britain is not even half way through the economic crisis and should brace itself for five more years of turmoil.



Mr King admitted that he was ‘pessimist’ about the state of the economy given the ongoing turmoil in the eurozone.



The figures, which are based on Office for Budget Responsibility forecasts, will make worrying reading for Chancellor George Osborne as they show that the financial pain for families will worsen ahead of the next General Election.



The OBR revised down its forecasts for real household disposable income since the Government’s 2010 spending review.



Rachel Reeves, Shadow Chief Secretary to the Treasury, said the hit on families was a direct result of the weakening economy.



She said the OBR’s initial forecasts had already taken into account the direct impact on household finances of tax rises and spending cuts such as last year’s VAT rise and this year’s reduction in tax credits.



In a speech today, Miss Reeves will warn that ordinary families have paid a ‘heavy price’ for the lack of economic growth and blame the Government for ‘choking off recovery’.



She will tell the Resolution Foundation: ‘The failure of David Cameron and George Osborne’s economic plan will cost families dearly. Not only are they hitting family finances hard with big tax rises and deep cuts to tax credits, but by choking off the recovery and pushing Britain into a double-dip recession families are earning less as well.



‘Even if the economy eventually recovers as the government hopes, by the time of the next election families will now be £1,700 worse off than if the recovery had been sustained. This is a permanent loss of income.

