New modelling from the
Foundation (JRF) finds
that average annual household disposable incomes
are projected to grow by just £40 over the course of the current
parliament after adjusting for
inflation (from April 2024
to April 2029).
However, according to JRF
modelling, we are at the high point of the
parliament. From April 2026 till the end of
the current parliament (taken
as April 2029) incomes are set to fall by £580.
These figures differ from
the £1,000 increase over
the parliament quoted by the Chancellor in her Spring
Forecast speech as they are modelled on a
household basis and take into account actual
housing costs, making them a
more accurate reflection of whether families feel
any better off.
The modelling uses the most up to
date forecasts from the Office for Budget
Responsibility (OBR) on key economic indicators such as
CPI inflation and average weekly
earnings. These are fed
into the IPPR Tax Benefit Model which uses the
Family Resources Survey to project household
incomes for each year up until the end of
the parliament.
The latest OBR forecasts do
not take into account the conflict in the Middle
East and its potential impact on the economy. Significant
changes to the OBR forecasts and to JRF's living
standards modelling are therefore possible, with a sustained
conflict downgrading the projections for disposable
incomes
The modelling reveals the scale of the
living standards challenge still facing families and the
government, with an increase of just 0.1% to incomes after
housing costs on average by the end of
the current parliament and incomes
falling from April 2026 to the end of the
parliament. This is in part due to projected
weak real earnings growth and rising housing
costs.
Chris Belfield, Chief
Economist at the Foundation
says,
“The government is right to focus
on families' incomes and
the sustained pressure they're under from the
cost of living through actions like removing the
two-child limit from Universal Credit and reducing the cost of
energy bills. In an increasingly uncertain
world, having enough set aside to withstand any potential
shocks is even more
important.
“But £40 growth over the
course of five years is not enough. It should not
be too much to ask for families who have been
struggling for years to start to feel better
off. We will never have a stronger economy if
families don't feel more secure and able to
take each and every opportunity to improve
their lives.
“The government needs to focus on
driving up living standards so families can feel the change day
to day. This needs action across all aspects of
government to bring down people's costs and boost their
incomes.”
Notes to
Editors
-
[1] The modelling analysis in this
report uses the Family Resources Survey (2023/24) and the IPPR
Tax-Benefit Model (version v02_92) to estimate household income
and housing costs for April of each year. The model takes the
base survey data to a given month (April in this instance) and
then applies inflation and the known
or anticipated tax and benefit policy regimes to
project household incomes and tax liabilities in future years.
All projected household income and expenditure is converted
into 2025/26 prices.
-
[2] In April
2024, average annual real disposable
income after housing costs were estimated to have
been £42,470. This is projected to have risen to £43,080 in
April this year, before falling to £42,500 by April
2029.
