Budget day analysis shows incomes set to fall by £450 over course of parliament
The Chancellor gave some help to families this winter. But without fundamental reform this is still set to be the worst ever parliament for living standards.
New analysis of the latest Office for Budget Responsibility (OBR) forecasts from the Joseph Rowntree Foundation (JRF) finds that average annual household disposable incomes are projected to fall by £450 over the course of the current parliament after adjusting for inflation (from April 2024 to April 2029).
This is broadly in line with JRF's previous projections based on the Bank of England's central scenario from July.
If incomes were to grow in line with the average for the period from 1961 to the pandemic, households would have been on course to be around £5,000 better off in 2029 than they were in 2024.
In the Budget the Chancellor announced measures that would help families this winter. But without fundamental reform this would still represent the worst parliament on record for living standards.
The analysis finds that the hit to living standards will impact households across the income spectrum. But any income hit is harder to bear for households on the lowest incomes.
Support for energy costs this winter does not fully address the hit to incomes from rising energy prices, with energy bills set to rise by close to £500 in January. Bold and long-term reform to reduce energy costs is still needed.
The analysis uses the most up to date forecasts from the OBR on key economic indicators such as CPI inflation, earnings, interest rates and the impact of policies announced at the Budget. These are fed into the IPPR Tax Benefit Model which uses the Family Resources Survey to project household incomes for each year up until the end of the parliament.
The analysis reveals the scale of the living standards challenge still facing families and the government, with a decrease of 1% to incomes after housing costs on average by the end of the current parliament. This is in part due to projected weak real earnings growth and rising housing costs.
Chris Belfield, Senior Economist at JRF, says:
“The government wants to beat the forecasts for economic growth. But to do that they need to invest in families' economic security. Falling living standards means instead of performing at their best and taking risks that drive productivity, families will still struggle to make ends meet. To unlock economic growth we need to see bolder interventions that give families and our economy the firm foundation of better living standards.”
Notes
- The modelling analysis in this report uses the Family Resources Survey (2024/25) and the IPPR Tax-Benefit Model (version v03_00) to estimate household income and housing costs for April of each year. The model takes the base survey data to a given month (April in this instance) and then applies inflation and the known or anticipated tax and benefit policy regimes to project household incomes and tax liabilities in future years. All projected household income and expenditure is converted into Q3 2026 prices.
- JRF is calling for bold interventions that lower the cost of housing and energy and invest in our social security system. These include a permanent return to annual uplifts of Local Housing Allowance (LHA) to be paired with a rent control that would slow rental growth directly within this Parliament, an Affordable Energy Guarantee and a Protected Minimum Floor to embed for the first time the principle of a safety net below which no one should fall.
This news article is part of the cost of living topic.
Find out more about our work in this area.