Warning over 'seven-year squeeze'

George OsborneAverage household incomes are set to drop by a massive 7.4% in real terms between 2009/10 and 2012/13, a respected economic think-tank has said.

Following Tuesday's autumn statement by Chancellor George Osborne, the Institute for Fiscal Studies said that the median average income was now expected to be no higher in real terms in 2015/16 than it was in 2002/03.
After Mr Osborne extended his austerity programme beyond the next election, the IFS said public spending is now expected to drop by 16.2% in real terms over a seven-year squeeze lasting until 2017.

"We are running out of superlatives to describe just how extraordinary are some of these changes," the think-tank's director, Paul Johnson, told a press conference in London.

Mr Johnson said the two-year 1% pay cap for public sector workers announced by the Chancellor would effectively wipe out the average "pay premium" enjoyed by male staff over their private counterparts.

But he added that the Government's public sector pension squeeze, which has led to strikes across the UK, would still leave workers with "substantially more generous" provision on average than in the private sector.

© 2011 Press Association
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