Key facts
- Labour could preside over the worst parliament for living standards since modern records began in 1961, according to the Joseph Rowntree Foundation.
- Average household incomes after housing costs may fall by £440 to £770 in real terms by 2029-30.
- The foundation urges "bold policy action" to address the "dire" outlook for living standards.
- Louise Haigh is leading taskforces on short-term cost of living measures and long-term structural interventions.
- The chancellor, John Healey, is expected to announce £1 billion in energy support and consider a £100 increase to the warm homes discount.
- The JRF recommends increasing benefits, relinking local housing allowance to rents, and raising universal credit.
The Joseph Rowntree Foundation (JRF) has warned that Britain is on course to experience the worst parliament for living standards since modern records began in 1961, with average household incomes projected to decline significantly by 2029-30.
The thinktank's analysis indicates that after accounting for housing costs, average household incomes could be between £440 and £770 lower in real terms in the 2029-30 financial year compared to when Labour took power two years prior. Even the lower end of this projection would represent the most substantial decrease in living standards recorded since 1961, adding to existing pressures from the previous parliament.
In response to the stark outlook, Labour's first secretary of state, Louise Haigh, has been assigned by Andy Burnham to lead cross-government taskforces focused on improving living standards. One taskforce is examining short-term measures for housing and energy costs, while the other is exploring long-term structural interventions, potentially including public control of essential services.
Chancellor John Healey is expected to propose approximately £1 billion in additional support for energy consumers in the upcoming budget, aiming to provide voters with "breathing space." However, there are internal government concerns that this measure may not be sufficient. Healey is reportedly considering increasing the warm homes discount by £100, funded by taxpayers, but is less inclined to support calls for the complete removal of levies from energy bills.
The JRF's living standards assessment utilized two energy price projections from the Bank of England. The foundation noted that recent global events, including the resurgence of conflict in the Middle East and a surge in oil prices above $100 a barrel, have aligned with the Bank's more adverse scenario. This has also fueled expectations of further interest rate hikes by the Bank of England to combat resurgent inflation, with markets anticipating four quarter-point increases by the end of next year. Consequently, borrowing costs for homebuyers have risen, with the average five-year fixed-rate mortgage reaching 6% this week.
Chris Belfield, chief economist at the JRF, emphasized the need for "bold policy action," stating that without it, families will be poorer than they were a decade ago, impacting those struggling to make ends meet and the millions already lacking essentials. The foundation advocates for a more ambitious energy package, including a baseline of cheaper energy for all households and increased benefits such as relinking the local housing allowance to average rents and boosting universal credit. These measures could be funded through increased capital gains tax rates, according to the JRF.
The JRF's methodology for accounting for housing costs differs from that of the Office for Budget Responsibility and other thinktanks like the Resolution Foundation. Despite promises to address economic missteps, Healey's budget is anticipated to be relatively modest, with significant decisions on taxation and spending likely deferred to the following year. This includes the timeline for the UK to meet its target of spending 3% of GDP on defense.