UK families over the financial worst?

For some UK families, the worst may be over - though not if it's a low income household. According to the Institute for Fiscal Studies (IFS) UK family incomes are likely to rise slowly thanks to falls in inflation and rising pay deals.

However the very poorest will still see a third year of declining income, and new child poverty targets are very unlikely to be met.


Winners and losers

The IFS numbers suggest poorer households will be increasingly hit this year by child benefit and working tax credits being linked to the consumer price index, rather than the retail price index, which traditionally tends to be higher.

"In 2012–13, the coming financial year, median income is projected to fall by 0.6% in real terms," the IFS says. This is certainly not the norm it admits. "Since consistent records began in 1961, real median income has grown at an average annual rate of 1.6% – but it is notably less dramatic than over the previous two years, when real median income fell by a projected 6.4%."

Winners and losers here? If you look at the IFS table below, it suggests pensioners, both single and couples, will do best while single working people and double-income households without kids also suffer relatively little. However the unemployed with families and single earners with children come out worst off.

IFS figures

Child poverty worry

"Under the previous Labour government, low-income families with children and pensioners were the major demographic groups heavily favoured by tax and benefit reforms," says the IFS.

The trajectory of child poverty, it adds, "will be upwards rather than downwards in the years ahead, making it inconceivable under current policies that the targets could be achieved (or even got close to)."

"Given this there seem to be two constructive ways forward: the government could reveal a credible plan for meeting the targets that it has signed up to; or it could set different targets which reflect its view of what is both desirable and achievable, and set out how it plans to meet those."
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