Living standards challenge still acute as average annual incomes set to grow by only £40 over course of parliament
The government needs to focus on driving up living standards so families can feel the change day to day. This needs action across all aspects of government to bring down people’s costs and boost their incomes.
New modelling from the Joseph Rowntree Foundation (JRF) finds that average annual household disposable incomes are projected to grow by just £40 over the course of the current parliament after adjusting for inflation (from April 2024 to April 2029).
However, according to JRF modelling, we are at the high point of the parliament. From April 2026 till the end of the current parliament (taken as April 2029) incomes are set to fall by £580.
These figures differ from the £1,000 increase over the parliament quoted by the Chancellor in her Spring Forecast speech as they are modelled on a household basis and take into account actual housing costs, making them a more accurate reflection of whether families feel any better off.
The modelling uses the most up to date forecasts from the Office for Budget Responsibility (OBR) on key economic indicators such as CPI inflation and average weekly earnings. 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 latest OBR forecasts do not take into account the conflict in the Middle East and its potential impact on the economy. Significant changes to the OBR forecasts and to JRF’s living standards modelling are therefore possible, with a sustained conflict downgrading the projections for disposable incomes.
The modelling reveals the scale of the living standards challenge still facing families and the government, with an increase of just 0.1% to incomes after housing costs on average by the end of the current parliament and incomes falling from April 2026 to the end of the parliament. This is in part due to projected weak real earnings growth and rising housing costs.
Chris Belfield, Chief Economist at the Joseph Rowntree Foundation says:
“The government is right to focus on families’ incomes and the sustained pressure they’re under from the cost of living through actions like removing the two-child limit from Universal Credit and reducing the cost of energy bills. In an increasingly uncertain world, having enough set aside to withstand any potential shocks is even more important.
“But £40 growth over the course of five years is not enough. It should not be too much to ask for families who have been struggling for years to start to feel better off. We will never have a stronger economy if families don’t feel more secure and able to take each and every opportunity to improve their lives.
“The government needs to focus on driving up living standards so families can feel the change day to day. This needs action across all aspects of government to bring down people’s costs and boost their incomes.”
Notes
- The modelling analysis in this report uses the Family Resources Survey (2023/24) and the IPPR Tax-Benefit Model (version v02_92) 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 2025/26 prices.
- In April 2024, average annual real disposable income after housing costs were estimated to have been £42,470. This is projected to have risen to £43,080 in April this year, before falling to £42,500 by April 2029.
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