Bold interventions on cost of living needed at the Budget to reverse living standards decline: JRF factsheet

To avoid the worst parliament for living standards on record the government must intervene directly on the cost of living with bold policies at the Budget, says the Joseph Rowntree Foundation (JRF).  

The economic picture for families is one of insecurity and falling living standards 

• Inflation hit 3.5% in September, with the biggest increases seen in the price of fuel. This is in line with the projection in the Bank of England's adverse economic scenario. 

• Higher energy costs, higher housing costs and weak earnings growth are driving an unprecedented fall in families' living standards.   

• Family incomes are set to be between £440 and £770 worse off on average over the course of the parliament (by 2029/30), according to JRF analysis of two plausible forecast scenarios from the Bank of England. [1] 

• The poorest families will be hit hardest, since essentials like energy and housing costs make up a larger proportion of their outgoings. This would drive an increase in poverty across the parliament. 

• In July this year, 7.4 million low-income families were unable to afford essential items in the last 6 months the highest number since 2021. [2] 

New evidence shows economic insecurity and falling living standards hurts economic growth 

• Economic insecurity reduces peoples' wages, employment and ability to function effectively at work. This amounts to £1,300 a year of lost output for each of the 21 million people affected a total drag on the economy of around £28 billion, or roughly 1% of GDP. This has risen by £9 billion since 2021/22 alone. [3] 

• A one-point reduction in economic security (e.g. from just about getting by to finding it quite difficult) leads to a 12% fall in an individual's real hourly wages.  [4] 

• When moving jobs, less economically secure workers are 10% less likely to experience a sustained increase in pay compared with those who are more secure, after controlling for other characteristics like age and pay. [5]  

The government can reverse falling living standards and support economic growth through bold interventions on the cost of living at the Budget.  

JRF is proposing policies that lower the cost of housing and energy, invest in our social security system and address insecure work, including: 

• Providing a portion of cheaper energy to all families, designed to cover a family's basic energy use, with larger amounts based on additional need, for example households with children or those in receipt of means-tested and/or disability benefits. To get support to families this winter and build towards an enduring policy to deliver cheaper energy the government should remove levies from electricity bills and provide a cash payment linked to historic consumption. [6] 

• • Relink Local Housing Allowance (LHA) to today's rents and commit to uprating them annually thereafter alongside introducing rent controls both within and between tenancies to curb rent growth. [7] 

  • Uplifting the Universal Credit standard allowance and limiting the deepest hardship caused by deductions and the benefit cap by introducing a Protected Minimum Floor (PMF). [8] 

  Taken together, this package would: 

  • See real incomes rise on average across the lowest income 60% of households by hundreds of pounds in real terms. This would more than offset both the squeeze in the first half of the 2020s and the impacts coming down the line from conflict in the Middle East.  

  • See the least well-off families benefit the most. The average increase is biggest for the least well-off families, who would see a boost to their disposable incomes of £1,020 per by 2029/30 compared to if those policies were not introduced.  

  • Could reduce the headline rate of inflation by 0.5 percentage points in the peak year. This would temper the impact of surging inflation from higher energy prices, reducing the pressure to raise interest rates.  

  • Reduce the cost of relinking LHA to local rents by 40% (£1.1 billion) in 2030/31 and leave low-income renters outside of the benefits system 10% better off overall in that year. 

  Notes to Editors 

  1. How big is the living standards challenge facing Andy Burnham? | Joseph Rowntree Foundation 

  2. Record numbers cannot afford the essentials: JRF's cost of living tracker, summer 2026 | Joseph Rowntree Foundation 

  3. PBE | Could household economic security help solve the UK's productivity puzzle? | PBE 

  4. Financial insecurity and productivity in the UK workforce | FAI 

  5. The hidden barrier to labour market dynamism | Joseph Rowntree Foundation 

  6. Helping households with energy costs this winter | Joseph Rowntree Foundation 

  7. How rent controls reduce the cost of Local Housing Allowance uprating | Joseph Rowntree Foundation 

  8. A protected minimum floor in Universal Credit to cut deep child poverty | Joseph Rowntree Foundation