More than two decades of stagnation in people’s disposable income is likely to lead to further political disruption in the UK unless pay growth accelerates, a new report from the Resolution Foundation has warned.

The report, Unsung Britain: Britain’s Poorer Half, said at the current rates, it would take more than 130 years for lower-income families to double their living standards.

In the 40 years leading to 2005, household incomes grew by on average 1.8 per cent a year.

But since then this rate has flatlined, growing at just 0.5 per cent per year, with slow wage growth, growing taxes and sharply rising housing costs all contributing.

Disposable incomes have stagnated over the last 20 years

placeholder image — Disposable incomes have stagnated over the last 20 years

This is despite the overall percentage of people in the lowest income bracket being in employment growing by 11 per cent in the period.

In fact, in the latest data, the majority (55 per cent) of non-pensioner families in poverty had someone in work. This is up from fewer than two-in-five families in the mid-1990s.

Average gross annual household earnings for lower-income families have increased by £7,700 since the mid-1990s to £18,000 today – but nearly three-quarters of that increase took place before 2004-05.

This petering out of earnings growth explains all of the slowdown in living standards growth since the mid-2000s.

The report defined lower-income families as working-age households whose disposable incomes fall below the national median.

It also said these 13 million households were disproportionately likely to have unpaid carers looking after disabled adults.

As part of the report, the foundation convened focus groups over a period of 18 months, looking at poorer people’s attitudes to and experiences of the cost of living.

It states: “Britain is not a nation at ease.

“We convened squeezed workers, carers and others – in places from Warrington to Worcester – and heard a sense of malcontent, voiced directly, which has been long years in the making.

“Things were felt to have got decidedly “harder” over the last generation, with the recent past particularly grim (“within four years, you could feel the slide”).

“There was bafflement about why things have played out so badly, when life was “never like this before.”

“The material roots of this mood of unease trace to a prolonged stagnation in disposable incomes that stretches far and wide across the population, a phenomenon that the Resolution Foundation has documented in many past reports.”

It goes on to say: “The 13 million working-age families across the poorer half of the country are widely courted by politicians.

“No party can win elections without their votes, and the country cannot succeed without their needs being met.

“They are working harder and caring more, yet remain poorly understood and badly served.”

The impact of rising housing costs is another significant contributing factors: “More lower-income Britons – some 8.6 million – now live in such tenancies than in mortgaged homes. On average, rent gobbles up 43 per cent of their total post-tax income. They enjoyed none of the automatic savings on interest that mortgagors benefited from for so long, and then more recently have seen rents racing ahead of incomes.”