Family incomes were protected over the course of the pandemic – but have fallen sharply since

Unprecedented government support helped to ensure that typical disposable incomes didn’t fall over the course of the pandemic, and actually rose for poor families, in marked contrast to the biggest income squeeze in a generation that Britain is currently living through, the Resolution Foundation said today (Thursday) in response to the latest Households Below Average Income (HBAI) statistics.

The DWP’s latest HBAI statistics for 2021-22 offer a detailed look at the impact of the pandemic and its aftermath on living standards.

The Foundation notes that typical household disposable incomes (after housing costs) were flat over the course of the pandemic – between the years 2019-20 and 2021-22 – while typical incomes for the poorest fifth of households actually rose by 5 per cent.

The fact that living standards didn’t fall amid a global pandemic and the biggest economic shock in a century shows just how effective government support – from the furlough scheme to the £20 a week uplift to Universal Credit – was at protecting incomes, says the Foundation.

The latest data does show a big increase in relative poverty in the year 2021-22. However, the Foundation cautions that this reverses a sharp fall the year before, may be affected by data collection issues, and that the bigger picture is absolute and relative poverty levels across Britain were broadly unaffected by the pandemic as a whole. They remain unacceptably high however, at 17 and 22 per cent respectively.

This welcome pandemic picture on living standards has been completely undone by the cost-of-living crisis that Britain is currently experiencing. The Office for Budget Responsibility (OBR) forecasts that average real household disposable incomes are set to fall by six per cent this year and next, and that living standards won’t return to pre-pandemic levels until the latter part of the decade (2027-28 or later).

The Foundation adds that while child poverty levels have been flat or down over the course of the pandemic, its recent analysis suggests absolute child poverty is likely to have risen in the past year (2022-23).

Adam Corlett, Principal Economist at the Resolution Foundation, said:

“The Covid-19 pandemic disrupted all our lives and delivered the biggest economic shock in a century. But we now know that, thanks in large part to unprecedented government support, the pandemic did not cause family disposable incomes to fall, or poverty to rise.

“However, while family incomes in general successfully navigated the pandemic they have been knocked for six by the ongoing cost-of-living crisis. As a result, typical disposable incomes are currently not forecast to surpass their pre-pandemic levels until the back end of the decade.”