We are better off with George

Expert backing for Chancellor’s claim that family incomes are higher now than when Coalition began

FAMILIES will be better off this year than they were when the Coalition came to power, independent experts said yesterday.

In a boost to George Osborne, the Institute for Fiscal Studies said it was ‘very likely’ that household incomes would be higher this year than in 2010.

The Chancellor’s claim that families would be £900 better off in 2015 was one of the key Tory messages in Wednesday’s Budget.

The IFS also raised serious questions about Ed Miliband’s much-repeated counter-claim that families are £1,600 worse off than they were in 2010.

In its annual post- Budget briefing yesterday, it suggested the Labour leader’s figure was out of date and failed to take account of rising pensioner incomes, surging employment or changes to the tax and benefit system.

The think- tank’s verdict potentially deals a fatal blow to Mr Miliband’s claims of a cost of living ‘crisis’. In a further blow, the IFS said inequality in Britain had fallen under the Coalition.

It also said Labour’s plans were so lax that Mr Miliband might borrow up to £25billion a year more than the Tories – piling up Britain’s £1.5trillion national debt indefinitely. But it did warn that the impact of coalition cuts had fallen most heavily on the poor, as a result of reductions in benefits.

Mr Osborne seized on the IFS verdict last night as evidence that the Government’s plans are starting to deliver higher living standards for families despite the years of austerity needed to deal with the huge budget deficit left by Labour.

The Chancellor said: ‘This is a very significant moment for our economic debate: on the day after the Budget, the independent IFS have confirmed the Office for Budget Responsibility forecast that living standards are set to be higher in 2015 than in 2010.

‘This is more evidence that our plan is delivering for Britain’s families, and it demolishes Ed Miliband’s central claim in this election. I’m the first to say that the job of repairing our economy isn’t done, because the British people are still paying a huge price for Labour’s great recession, but Britain is on the right track and we must not turn back.’

The debate over living standards provoked a furious row between Labour and the Conservatives during Wednesday’s Budget.

The IFS said Labour’s claim was based on figures from the Annual Survey of Hours and Earnings, covering the period 2010-2014.

Economist Robert Joyce said it was true that these figures show average earnings fell during this period. But he said more recent data showed earnings are now ‘growing’. And he warned the Labour statistics give only a partial view of total household income.

The figures do not include pensions, which have received a substantial boost. Because they are gross figures they also do not include the impact of tax changes.

And they do not reflect that fact that employment is up by almost two million – meaning many people who previously had no income are now earning. Mr Joyce said: ‘It is reasonable to think that real average incomes will surpass pre- crisis levels in 2015.’

He did not directly endorse Mr Osborne’s £900 figure, but said it was based on a ‘quite reasonable measure of living standards’. He said the IFS’s own forecasts also suggest a significant rise in living standards this year. The IFS ruling was not all good news for Mr Osborne. It said there was ‘no cause for celebration’ as Britain has suffered ‘by far the slowest recovery in modern history’.

IFS director Paul Johnson said that real incomes were ‘very likely’ to be higher this year than in 2010. But he added: ‘We are, for sure, worse off than we could reasonably have expected to be back in 2007, or indeed back in 2010.’

The IFS also assessed Mr Miliband’s claim that the Coalition has produced a ‘recovery for the few’. Mr Johnson said research showed that ‘across the huge majority of the population, inequality has fallen since 2010’.

The total burden of austerity since the start of the recession has

‘A significant moment’ ‘Remarkably unaffected’

fallen most heavily on the top 10 per cent of earners.

But, if Labour raids on the rich before 2010 are stripped out, it is the poorest 10 per cent who have lost the biggest proportion of their income, because of cuts to benefits.

Those in the middle have been left ‘remarkably unaffected,’ Mr Johnson said.

Shadow Chancellor Ed Balls said the findings were a ‘damning verdict’ on the Government.

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