Matthew Whittaker
How ‘fair’ can next week’s deficit reduction plan ever actually be? The Institute for Fiscal Studies has shown that in the three recessions of the 1970s, 1980s and 1990s, those on low and moderate incomes, rather than the very poorest, were most exposed. In fact while those in the middle of the income distribution saw their incomes drop in all three recessions, those at the bottom and the very top actually experienced a slight growth in income during these periods.
All the indicators suggest that things have been no different this time around. Echoing TUC findings, our earlier report Closer to Crisis? showed how the ‘squeezed middle’ have suffered more during this recession than other groups – with a greater risk of job loss and drops in income, higher living costs and fewer safety nets such as savings or insurance.
Looking ahead, the question is how this group can avoid bearing the brunt of the fiscal consolidation as the public sector shrinks and as private sector growth remains sluggish. The Resolution Foundation today publishes a report which explores what options the new government has to cut the deficit, and the impact these options might have on the UK’s 7.2 million low earning households.
