Time running out to prevent decade of falling incomes

The government faces a profound threat from falling living standards unless decisive policy action is taken to boost families' disposable incomes.  

New analysis from the Joseph Rowntree Foundation (JRF) shows we are on track for a decade of decline in families’ disposables incomes by the end of the parliament (September 2029). [1] This comes after a decade of stagnant earnings growth following the financial crisis. 

By updating the March 2025 Office for Budget Responsibility (OBR) projections using the latest Bank of England forecasts, JRF has modelled household disposable incomes after housing costs over this parliament. [2] The modelling includes economic variables such as projected earnings growth, inflation and interest rates.  

By the end of the parliament:  

• Disposable incomes will be on average £550 (1.3%) lower per year than in September 2024 and £570 (1.3%) lower than today. 

• A fall in disposable incomes by 1.3% over the parliament would represent the worst living standards record of any parliament since detailed records began in 1961.  

• The modelling also estimates that disposable incomes fell by 0.5% during the first five years of the 2020s, which means families are now at risk of seeing a decade of falling disposable incomes and living standards.  

Low-income families hardest hit by falling disposable incomes over the decade 

Without savings to cushion the impact of having less income, low-income families will find it nearly impossible to afford food in their fridge, to keep their home warm, or to keep on top of their bills.  

In the decade between September 2019 and September 2029: 

• Families in the bottom third of incomes will see their disposable income fall by £1,110 per year (6.2%).  

• Middle- and high-income families will see their incomes fall by £380 per year (1.1%) and £970 per year (1.3%) respectively.  

Age and parenthood are key determinants of living standards outlook 

Lone parents will see the biggest drop in living standards over the course of a decade, followed by couples with children and single working-age adults without children.  

In the decade between September 2019 and September 2029: 

• Working-age households will be around £900 per year worse off, compared to £170 for the average pensioner household.  

• Couples with children are set to be £1,580 per year (2.8%) worse off while lone parents are set to be £1,510 per year (5.6%) worse off. In comparison, couples without children will be around £180 per year (0.3%) worse off.   

The research finds that housing costs which will rise faster than inflation, falling net earnings, and working-age families receiving less income from social security will all negatively impact disposable incomes. Failing to stop living standards deteriorating by the end of the parliament could have serious consequences for the Labour government at the next election. [4]  

Bold long-term strategy needed to address decade-long living standards decline 

The government will need a longer-term strategy for bolder and more direct increases in living standards that sits at the heart of its plan for growth to address the full scale of a decade-long decline in living standards. 

However, there are reforms that can be introduced immediately that would improve families’ living standards. These include: 

• Creating a new ‘minimum floor’ in Universal Credit so there is a line below which no one's payment can fall because of the benefit cap. 

• Removing the two-child limit in Universal Credit. 

• Permanently unfreezing Local Housing Allowance (LHA). 

• 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. 

Chris Belfield, Chief Economist and Principal Policy Adviser at JRF, said: