UK living standards forecasts point to falling incomes for working-age households

UK living standards are forecast to grow only marginally by the end of the decade, while typical working-age households could lose £1,050 in disposable income by 2029, BBC News reported on 29 October. The forecasts sharpen concern over how higher living costs will affect households after Chancellor John Healey’s Budget.

Which households face the biggest income squeeze

The Resolution Foundation estimated a £1,050, or 3%, fall in disposable income for typical working-age households between now and 2029, according to the BBC. It said the announced £100 support payment would not fully offset higher energy bills. That estimate concerns working-age households specifically, rather than every household in the UK.

The Institute for Fiscal Studies described this decade as set to be the worst on record for household income growth, the BBC reported. That is an assessment of the projected decade, rather than an outcome already measured through its end.

How energy costs changed the Budget outlook

The Guardian reported that the OBR expects inflation-adjusted household disposable income to fall by 0.6% next year. In March it had forecast a 0.6% rise. Higher energy costs account for most of that change, according to the OBR’s assessment reported by the Guardian.

The Guardian also reported that the OBR raised its growth forecast for this year from 1.1% to 1.2% but cut its 2027 estimate from 1.5% to 1%. The forecaster said the outlook remains highly uncertain: a higher, sustained energy-price peak could add £17bn to government borrowing next year against its central forecast, while a lower price path could reduce borrowing by £12bn.

Healey said the Budget offered households ‘breathing space’ but acknowledged that the government could not remove cost-of-living pressures completely, according to the BBC. The Guardian reported that the measures include £100 payments for 20 million households and a plan to abolish standing charges on gas bills.

Conservative shadow chancellor Andrew Griffith said public finances had become more fragile, while Liberal Democrat leader Ed Davey criticised the payment in light of tax rises, the BBC reported. Their responses come as households face a forecast decline in purchasing power next year despite the Budget support.