By Marcus Leach

Research published by the the Institute for Fiscal Studies has revealed that households in the UK may be facing the single biggest drop in income for close to thirty years.

The think tank said that despite median incomes having risen during the recession we could see as much as a 3% drop in 2011.

Average take-home incomes grew during the recent recession, increasing in both 2008/09 and 2009/10 even after taking account of inflation and in spite of the increase in unemployment.

This surprising finding comes from official statistics released today, Friday 13th. However, the increase in average incomes observed during the recession seems likely to be more than unwound in 2010/11 as the long-term effects of the recession are felt and higher inflation erodes living standards.

Overall poverty fell for a second year running in 2009/10 (when incomes are measured before housing costs), mainly due to falling poverty amongst pensioners and children. These falls mean that by the end of Labour’s thirteen years of office, pensioner and child poverty had both fallen to their lowest levels since the 1980s.

Income inequality was largely unchanged, remaining close to its highest level since current measurement began in the early 1960s.

The annual Households Below Average Income report from the Department for Work and Pensions describes the pattern of household incomes after deducting direct taxes and adding tax credit and benefit payments, and adjusting for family size.

Incomes can be compared both before housing costs (BHC) and after (AHC). Poverty lines for some typical family types can be found at the end of this press release. The data covers the period up to 2009/10, Labour’s last full financial year in office and the last year of the recent recession.