Ministers should ‘stop managing scarcity’ in living standards push
Government policy should concentrate on reducing the cost of essentials to help improve living standards for lower-to-middle income households, according to a new report from Bright Blue.
The centre-right think tank argued that policy should focus on lowering energy costs and improving housing affordability, two areas where the UK performs particularly poorly compared to international peers.
According to Bright Blue’s research, the combined costs of housing and energy are 44 per cent higher in the UK than across the OECD average.
This has hit poorer households much harder than richer ones, since they tend to spend a much greater share of their income on essentials.
The report found that low-to-middle income households spent 8.5 per cent of their disposable income on energy in 2023-24, up from 5.9 per cent in 2019-20. For households earning above the median income, the equivalent figure in 2023-24 was 5.6 per cent.
And with regard to housing, the think tank found that the poorest quarter of the population spent just over a fifth (21 per cent) of household income on housing, three-and-a-half times more than the richest quarter.
“While real incomes have stagnated for most income brackets in the UK, costs for low-to-middle income households have uniquely risen,” Bartek Staniszewski, head of policy of Bright Blue said.
“Policymakers urgently need to focus on striving for plenty rather than just managing scarcity as a means of significantly improving living standards for low-to-middle income households.”
Lower house prices to boost living standards
To help improve housing affordability, Bright Blue suggested that Local Planning Authorities (LPA) should not be able to block housing developments unless a Local Development Order (LDO) is already in place.
An LDO is a planning document that specifies which types of development should be approved in a specific area, meaning that developers do not have to seek planning permission.
This would dramatically curtail the ability of local councils to block new housing developments, and move the planning system much closer to a zonal system.
The think tank also suggested that the government should commit an extra £163m annually towards the financing of 7,500 new planners in LPAs to help with capacity issues.
A quarter of planners left the public sector in the seven years up to 2020, according to the Royal Town Planning Institute, putting the system under significant strain.
The government should also reform the Building Safety Regulations so as not to require buildings over 60m tall to have two staircases, a safety policy which has constrained the supply of new housing, particularly in London.
On energy, Bright Blue said the government needed to take “urgent” action to try and decouple electricity prices from wholesale gas prices.
The UK’s wholesale electricity market operates under a marginal pricing system, meaning the system price is set by the most expensive source of electricity, which is usually gas.
Gas set prices 88 per cent of the time in 2015, increasing to 97 per cent in 2021, even though it only accounted for 40 per cent of total electricity generation between 2017 and 2021.
“A government-backed Electricity Pricing Commission should be formed, sitting within DESNZ, to investigate alternative approaches and with the mandate to recommend an alternative model for the Government to adopt. The Commission should have the right to launch inquiries and be required to make its definite recommendation within three years of its formation,” the report said.