A year of Labour but no progress: JRF’s cost of living tracker, summer 2025

Our cost of living survey tracks the experiences of families in the bottom 40% of equivalised incomes before housing costs in the UK. We focus on these families as they have below average incomes and are therefore more at risk of poor outcomes, while still making up a large proportion of families living in the UK. For the May 2025 cost of living tracker this means families have equivalised incomes below £28,209 per year before housing costs, or £2,251 per month.

This represents a diverse range of households from across the UK that may experience hardship in different ways. Just over 6 in 10 households are headed by someone of working age (63%) and the remaining 4 in 10 are pensioner households (37%). Of working-age households, 7 in 10 households have at least 1 adult in work (with 4 in 10 having all adults in work). Around 4 in 10 low-income families own their homes outright (with the majority (66%) of these households headed by someone aged over 65). Almost 3 in 10 households live in socially rented homes, almost 2 in 10 in privately rented homes and the remaining 15% own their home with a mortgage.

The following briefing sets out up to date information on the living standards of these families, as well as projections for the rest of this parliament.

Our modelling¹ shows that, after housing costs, disposable incomes (‘disposables incomes’) for households in the bottom 40% of incomes in the UK followed a turbulent path through the pandemic, then fell as inflation peaked in 2022 before flat-lining to April 2025 (see Figure 2).

In the 6 months to May 2025, 7.1 million low-income households (60%) were going without essentials. This number has been at least 7 million since October 2022, despite some economic conditions easing (Figure 3a). 

As in every wave of our survey, food is the most common essential item being missed out on by low-income families. We find 5.3 million low-income families were cutting back or skipping meals, and 4.1 million report going hungry in the past 30 days. These numbers show no progress on levels of hunger seen since October 2022. We also track foodbank use, with 1.5 million low-income families using a foodbank in the 6 months to May 2025. Foodbank use has trended up slowly in our tracker, from 9% in May 2022 to 13% of low-income families in May 2025 (Figure 3b). 

Some groups within low-income households continue to face a very high risk of going without essentials (Figure 3c). Over 8 in 10 low-income families with children (82%) were going without essentials in the 6 months to May 2025. This includes two thirds of families with children cutting back or skipping meals (66%) and almost 6 in 10 going hungry (57%) in the 30 days prior to the survey in May 2025. Families with 3 or more children are at even greater risk, with 9 in 10 going without essentials (88%).

We also find elevated rates of hardship for families where someone has a disability, with 7 in 10 going without essentials (69%) compared to 54% of families with no disabled people. For working-age families in receipt of disability benefits, either Universal Credit (UC) health related elements (Limited Capability for Work and Limited Capacity for Work Related Activity) or Personal Independence Payment (PIP), it’s even higher at nearly 8 in 10 (78%) going without essentials. For working-age families with children where someone in the household receives disability benefits, almost 9 in 10 (88%) were going without essentials.

Other demographic groups continue to face very high rates of going without essentials, including over 8 in 10 low-income families on UC (81%), 89% of low-income families with a respondent of mixed ethnicity and 83% for black respondents, and 86% for respondents aged between 18 and 34 (Figure 3c).

Another way we measure hardship is whether families are able to keep on top of their bills and credit commitments. We find 4.4 million low-income families are behind on at least one bill or credit commitment in May 2025 (37%), similar to May and October 2024. The average level of arrears remains at £1,380 (the same as May 2024); although down from the peak of £1,630 in October 2022 (Figure 4a).

Overall low-income households owe around £6.1 billion in arrears across all household bills and credit commitments. Of this, around £2.2 billion is owed on bills which are considered ‘high priority’ as they can have significant consequences if you fall behind. This includes council tax, rent or mortgage payments and energy bills. While the total amount of priority arrears has slowly declined, there has been an increase in the average amount of mortgage arrears, up from £690 in May 2024 to £870 in May 2025. This increase is expected, as families come off their fixed-term mortgages and move onto higher rates, placing additional pressure on budgets.

Facing even more acute hardship, 1.3 million households are behind on 4 or more bills (29% of those in arrears). Again, this is similar to May 2024, although below the peaks in 2022 and 2023. This can have significant consequences for families as the more bills you fall into arrears on the more it can affect people’s credit file and future borrowing ability.

As with going without essentials, some groups are at much higher risk of falling behind on their bills. Two thirds of families with children were in arrears in May 2025 (66%), more than double the rate for families without children (27%). This is an increase compared to our last 2 waves, and returns levels back to the peak seen in October 2023. Over 8 in 10 families with 3 or more children were in arrears (82%), the highest proportion we have seen in any wave of our tracker.

Other demographic groups have also seen a rise in the proportion behind on bills. After falling in May and October 2024, the proportion of families with a black, Asian or mixed ethnicity respondent in arrears rose in May 2025, back to May 2023 levels (see Figure 4d). We find a similar picture for survey respondents aged 18-24 and families who have a mortgage. While the rates of arrears are not back to peak levels seen in October 2022, they have increased for the first time in a year.

Almost half of low-income families receiving disability benefits of all ages were in arrears in May 2025 (49%), owing on average £1,500. This is a similar level to low-income families receiving means-tested benefits (50%), showing social security is not enough to allow families to meet their core costs.

Being behind on your bills is one type of debt, while another is where families have used credit to pay for things. Taking on a loan in and of itself isn’t a bad thing, however it becomes concerning when families rely on credit to cover essentials, can only access high-cost credit, or fall behind on repayments.

Around 4 million low-income families currently hold a loan they took out to pay for food, housing or essential bills like council tax or energy (34%) (Figure 5a). This remains unchanged from when we first started tracking in October 2023. These families hold around £8.3 billion in loans for essentials, which is a lower amount of total debt held compared to the last 2 waves. This is because the average amount of debt held for different types of loans is down slightly, while the number of families holding the loans for essential costs has remained the same. Households that hold debt for essential costs still experience very poor outcomes, with nearly 9 in 10 going without essentials (89%) and over 7 in 10 are in arrears (73%).

The same groups of low-income families who are unable to afford the essentials and are behind on bills are much more likely to hold a loan they took out to pay for essentials. We find 6 in 10 low-income families with children hold a loan for essentials (60%), rising to 7 in 10 families with 3 or more children (71%). Two thirds of families with a black respondent held a loan for essentials (66%), more than double the rate for families with a white respondent (28%). These are the highest rates we have seen since we started tracking in October 2023 (Fig 5b). Low-income families receiving benefits are also more likely to hold loans for essentials than those not on benefits, with 44% of families receiving disability benefits holding a loan for essentials, similar to those receiving any means-tested benefit (46%).

Another type of concerning debt is high-cost credit loans from unregulated lenders (loan sharks), doorstep lenders, payday lenders and pawnshops which are trending in the wrong direction. Around 2.4 million low-income families held a high-cost credit loan in May 2025 which, while still below peak levels seen in October 2022, is moving in the wrong direction (see Figure 5c). These high-cost credit loans are worth around £3.8 billion in May 2025, over a billion more than a year ago. This is £1,600 of high-cost credit debt per household. While many types of high-cost credit are unregulated, payday loans are capped at 0.8% interest per day. If we apply this interest rate to the value of high-cost credit loans, this would see families paying almost £90 in interest alone each week, which is likely to be an underestimate given interest for unregulated lending is likely to be higher. This means families would be paying around 23% of their weekly income on paying back high-cost credit interest alone (based on average net household income before housing costs for the bottom 40%).

Part of why we are seeing the proportion of families holding loans increasing again is likely to be a loosening of credit availability. During the peak of the cost of living crisis there was a tightening of credit availability, with stricter eligibility requirements, higher interest rates alongside regulatory changes. Now, as interest rates continue to fall, lenders are indicating that both secured and unsecured credit supply has increased slightly and this is expected to continue in 2025. This is reflected in the proportion of low-income families being refused loans in the last 6 months falling (Figure 5d). Of low-income families who applied for a loan, 7% were refused in the previous 6 months in May 2025, half the proportion refused in the 6 months to May 2024 (14%).

Over the past year disposable incomes have flat-lined while the cost of essentials remains high following inflation in 2022 and 2023 and, as a result, key measures of hardship – going without essentials, arrears and debt – saw no improvement. To look at the outlook for the future, we have used microsimulation modelling to convert macroeconomic forecasts from the OBR into household-level impacts for the bottom 40% of incomes to show the outlook over the rest of this decade. We find that average disposable incomes after housing costs are forecast to fall by £690 per year for households in the bottom 40% of incomes, between April 2025 and 2030 (Figure 6a).

This is primarily being driven by the impact of high housing costs, with real incomes almost unchanged before housing costs, but falling nearly 4% when factoring them in. The impact of elevated interest rates will continue to feed through into higher mortgage costs with the average mortgage holder in the bottom 40% of incomes paying an extra £1,460 per year in real terms by 2030. Private renters similarly are forecast to see significant increased costs, averaging an extra £950 per year by 2030, while social renters see an increase of £450.

Our modelling highlights the significant variation in the outlook for living standards across the income distribution. Households on the bottom 20% of incomes are forecast to see their disposable incomes fall by over 6% between now and 2030, over 4 times faster than families on the highest incomes (Figure 6b). This is driven by rising housing costs, which reduce disposable incomes across the distribution, but the impact is felt most by the poorest households as they spend the highest share of income on housing costs.

Our modelling does not include the impact of the cuts to the health-related elements of UC for future claimants, which are currently going through the legislative process. Around 750,000 future recipients of UC health are expected to be affected, losing an average of £3,000 per year. For the families affected, this will further erode household incomes on top of the loses projected here. 

With a year gone since Labour Government took office, our tracker yet again reveals a picture of stubbornly high levels of hardship. With a deteriorating economic outlook, our modelling indicates living standards are projected to fall again for many families over the course of the rest of this parliament. Without policy change or significant improvements in the forecasts, we would expect to see an increase in our core measures of hardship in future as families have less income available in real terms to meet their costs.

JRF is calling for the Government to place economic security for households at the centre of their mission for growth, to place growth on a surer footing, and ensure change is felt by households who need it the most.

Firstly, the Government must make immediate progress on bringing down hardship by:

• introducing a protected minimum amount of support 15% below Universal Credit’s basic rate, as a first step towards an Essentials Guarantee – this would build on the recent Fair Repayment Rate by capping all deductions at 15%, including the benefit cap
• unfreezing LHA and permanently relinking it to local rents
• increasing targeted support for low-income households on energy bills (beyond the current expansion in the warm homes discount)
• reforming no recourse to public funds
• increasing the rate of means-tested benefits for carers, to help protect those on the lowest incomes from poverty
• not pursuing its cuts to the ‘health’ element of Universal Credit from April 2026
• scrapping the ‘2-child limit’ on support for children in Universal Credit.

Secondly, the Government must also build the foundations of a stronger social settlement that can provide real economic security for families now and in the future. This would mean an Essentials Guarantee in Universal Credit to ensure everyone has a protected minimum amount of support to afford essentials like food and household bills. It would also mean reform to the housing system: increasing funding for the provision of new social homes, building on recent Government announcements, as well as taking steps to tackle the financial pressure that high rents in the private sector put on households. It would mean introducing an energy social tariff, that will support low- and middle-income households through the transition to net zero, by targeting the high and rising energy costs families are facing. It would mean ensuring that the Employment Rights Bill helps make work a genuine route to economic security for people across the UK, and building on this through ensuring the Fair Work Agency has proper funding and resource invested in it. This will ensure UK workers have better protections, including reviewing the low rate of statutory sick pay, moving towards a right to feasible flexible working from day 1 of a job, and expanding employment for disabled people.

And finally, a rethink of our care infrastructure so that parents have access to the right kind of childcare that allows them to work if they want to, as well as proper financial support for people who need to temporarily step away from work to help care for a loved one.

A comprehensive package of changes to boost living standards is required so that low-income families can finally feel some reprieve from a cost of living crisis that is still far from over.

1. We use households in the bottom 40% of incomes before housing costs, to reflect the same population as the cost of living survey. For the method note on the microsimulation modelling please see Annex 1 in the briefing: Starmer's missed milestone? The outlook for living standards at the Spring Statement