Incomes to fall for two more years, says OBR

Household incomes will continue to be eroded in real terms for at least two more years, according to forecasts by the Office for Budget Responsibility (OBR).

The OBR does not expect earnings growth to overtake the rate of inflation until 2013 and not by a significant margin until 2014.

Robert Chote, chairman of the OBR, said the economy was forecast to shrink by 3.5% overall by 2016.

He told a press conference that "the economy has grown much less strongly this year than we expected at the time of the March budget, largely because higher than expected inflation has squeezed household income and consumer spending."