Poorest Face Five Years Of No Income Growth

Two years of progress in lifting people above the poverty line is to be followed by five years of zero income growth for the poorest households, a report has warned.

The study, for the respected economic think-tank, the Institute for Fiscal Studies (IFS), said that while record employment had boosted earnings across the board, the Government's benefit and tax credit reforms would hold back future gains until 2021 - with child poverty and inequality growing.

The report estimated a real recovery in living standards had taken place since 2014 with 400,000 children, 300,000 working-age adults without children and 200,000 pensioners being lifted above the absolute poverty line.

It charted a boost to consumer spending power from low inflation and said that inequality - the gulf between the lowest and highest earners - had remained roughly unchanged over the period in percentage terms.

But the report warned the poorest would suffer most over the next five years, if Office for Budget Responsibility forecasts and Government spending plans were unchanged, with the proportion of children in absolute poverty rising by three percentage points.

Crucially for the Chancellor, the IFS added that while the National Living Wage - due to take effect next month - would significantly increase the incomes of some low earners, its impact on official measures of poverty would be limited.

It had previously warned that the Government's tax credit and benefit cuts would leave 2.6 million families £1,600 a year worse off.

Then, earlier this month, the organisation said George Osborne was under pressureto find further spending cuts or raise taxes in his latest Budget in two weeks' time.

Labour seized on the latest findings.

Shadow chancellor John McDonnell said: "This report should shame the Chancellor, as any upsides rely more on the policies of OPEC in setting oil prices than George Osborne in boosting wages.

A Government spokesman pointed to progress on income growth, particularly among young adults but said: "We need to show resolve in delivering reforms to improve our productivity which is the only way to deliver sustained rises in living standards.

"At a time of global economic turbulence and heightened risk this means we must stick to the plan to build our resilience and deliver economic security for working families."