Labour: Households £1,700 worse off

Updated: 
Fifty pound notesHouseholds will be £1,700 worse off on average as a result of the Government's economic plans, Labour will claim.

Rachel Reeves, shadow chief secretary to the Treasury, will accuse Chancellor George Osborne of choking off the economy at the same time as hitting family finances hard.

The permanent loss in incomes, mainly accounted for by lower earnings and higher unemployment levels sparked by the "weakened" state of the economy, show the "heavy price" Britain will pay for years to come, she will claim.

"The failure of David Cameron and George Osborne's economic plan will cost families dearly," Ms Reeves will tell the think-tank Resolution Foundation.

"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. These shocking figures show the heavy price Britain will pay for years to come for George Osborne's economic failure and years of lost growth."

The figures are drawn from analysis of official projections for real household disposable income commissioned from the House of Commons library, Labour said.

They show the Government's independent forecaster, the Office for Budget Responsibility, has been forced to revise down its forecasts for real household disposable income dramatically since autumn 2010, when the Government announced its spending review, Ms Reeves will tell the think tank.

Overall, salaries in 2015 will be £1,700 lower, she will say. Ms Reeves will add that the real disposable income of the average UK household was £800 less than first forecast in 2011, and is expected to be £1,100 less in 2012, £1,700 less in 2013, £1,800 less in 2014, and £1,700 less in 2015, totalling £7,100 in lost income over the life of the Parliament.

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