Worst of British slump yet to come: think tank

LONDON, Sept 12, 2011 (AFP) - The pain of Britain's austerity measures will be felt for years to come owing to some of the worst falls in living standards since World War II, a leading economic research body warned on Monday.

With the government trying to rein in Britain's record deficit, household incomes will suffer as public spending reductions and tax rises begin to bite, the Institute for Fiscal Studies said in a report.

The government had only been able to soften the blow of the recession until now through "unusually generous" increases in financial support, it added.

"The current economic downturn began more than three years ago, and may seem like old news," said Robert Joyce, a research economist at IFS and a contributor to the report.

"But, as in other developed countries, the most severe consequences of the recession on UK living standards have only just begun to be felt, and will continue to be felt for years to come."

The report said: "As governments attempt to repair their public finances, household incomes now look set to be squeezed for a considerable length of time.

"It seems much of the impact of the 'Great Recession' was not felt until after the economy had stopped contracting, but that the pain was delayed rather than avoided.

"This would mean the UK had experienced one of the worst decades for changes in living standards since at least World War Two.

"The 'Great Recession' looks set to cast a very long shadow."

Household incomes in Britain grew slightly after the 2007 economic crisis and through the 2009 recession, the IFS said.

However, in the last financial year, earnings, tax credits and state welfare handouts all fell in real terms.

A 3.5-percent fall in median net household income in the year to April, the largest drop since 1981, is estimated by the IFS, showing that much of the impact of the recession was delayed.

The institute also found that Britain's six-percent drop in economic growth from peak to trough during the recession was "somewhere in the middle" of other countries' experiences.

Japan, Ireland and Sweden witnessed sharper plunges while Canada saw a smaller drop.

Trade unions are set to call for a rethink on the government's spending cuts programme at their annual conference this week.

However, government ministers have insisted they will stick with their programme.

A spokesman for the Consumer Credit Counselling Service, one of Britain's biggest debt advisers, told The Daily Mail newspaper: "It is all the little pressures that are adding up to hurt families and other households, and erode their income.

"This is not necessarily about people who are unemployed. Even if you didn't lose your job last year, people are really struggling," he added.

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