Living standards warning: ‘the decade looks bleak’
British families will not see their income grow in the next five years while pensioners will be £1,500 better off, economic researchers have projected in a “bleak” analysis that cast a shadow over government plans to boost households’ budgets.
Chancellor Reeves claimed at this year’s Spring Statement that Britons would be £500 better off each year in a remark that was later questioned by leading economists and opposition figures while the Labour Party itself said the value would only come to light in 2029.
But a new report by the think tank Resolution Foundation on living standards has suggested that households will only see their incomes grow by some £300.
Meanwhile researchers pointed out that pensioners are set to benefit far more than younger generations, with over 65 year olds set to see incomes jump by £1,300 in the next five years compared to no change for families with children.
The typical income will also “remain essentially unchanged” over the 2020s, making this decade the worst in 60 years.
By comparison, households saw income grow by nine per cent in the 2010s as the previous government wrestled with imbalances caused by the financial crash and economic instability after Brexit while productivity levels risked deteriorating due to low capital spending.
The forecasts are based on the latest figures published by the Office for Budget Responsibility (OBR) in March. Numerical values are based on 2024-25 terms while growth percentages are adjusted for inflation projections stated in the fiscal watchdog’s last report.
Key assumptions state that unemployment remains flat and real earnings growth falls no lower than around 0.6 per cent in the next few years, which would be marginally better than OBR estimates.
Lower income families could be four per cent worse off in 2030 and even see an eight per cent drop in income when measurements are taken across the decade, economists also predicted.
Income levels to be hit by fiscal drag
The latest analysis comes as the World Bank also warned this decade would be the worst for global growth since the 60s, with President Trump’s tariffs hitting dozens of developing countries across the world.
But the Resolution Foundation’s new findings suggest domestic policies are damaging British families’ financial prospects, with higher council taxes, fiscal drag – otherwise referred to as a “stealth tax” given income thresholds will not be adjusted for inflation until 2028 – and sticky inflation eroding people’s earnings.
“The living standards story of the decade so far has been bust and boom,” said Resolution Foundation economist Adam Corlett.
“But the rest of the decade looks bleak.”
The think tank called on the government to consider reviewing ineffective policies aimed at supporting council taxpayers, renters and households paying high water bills if it wishes to let household income grow at a higher rate.
But economists also warned that the government would be unable to take control over all variables impacting income.
“Inevitably, prospects for living standards will also depend on a dose of luck – varying with the negative and positive shocks hitting the economy in the coming years, for instance on global commodity prices and on underlying technological trends,” the report said.
“Sustained growth will be essential to drive up real earnings and tax revenues. But the government will also be trading off the ability to help households directly with the need to invest more and to adequately fund public services.”