A study from the Joseph Rowntree Foundation has warned that the Labour government is on course to preside over the worst parliament for living standards in modern British history, with real household incomes projected to fall sharply by the end of the decade. The stark analysis comes three weeks before Chancellor John Healey delivers his budget.
The Joseph Rowntree Foundation (JRF) has warned that Britain faces a 'dire' outlook for living standards unless the government takes 'bold policy action'. The think tank predicts that average household incomes, after accounting for housing costs, will be between £440 and £770 lower in real terms in 2029-30 than when Labour came to power two years ago. Even the lower end of this range would represent the largest decline since modern records began in 1961.
The analysis comes three weeks ahead of Chancellor John Healey's budget. Prime Minister Andy Burnham has promised voters a 'breathing space' in the upcoming fiscal statement. Healey is expected to offer £1 billion in additional support to energy consumers, most likely by increasing the Warm Home Discount by £100. This falls short of calls from Energy Secretary Miatta Fahnbulleh to spend billions more on removing levies from bills altogether. First Secretary of State Louise Haigh has been tasked by Burnham to lead cross-government taskforces focused on turning around living standards through a mix of short-term measures and long-term structural interventions.
The foundation's projections are based on the Bank of England's central and adverse energy price scenarios. The think tank notes that real world events have tracked close to the adverse scenario, with oil prices surging past $100 a barrel following renewed hostilities in the Middle East. This has also increased expectations that the Bank of England will raise its base interest rate to 4.75% by the end of next year, further squeezing household budgets. The government's 10-year plan to address these pressures is expected later this autumn.
Analysis
Why This Matters
- The budget will be a defining moment for the government's economic credibility and its ability to alleviate the cost of living crisis.
- If the JRF's projections hold, millions of British households will face an unprecedented squeeze on their disposable income.
- The government's internal debate between short-term relief and long-term structural change will determine the political landscape.
Background
Labour took office in 2024 with a promise to fix the economy. It inherited a tight squeeze on living standards from the previous parliament, driven by an energy crisis sparked by the war in Ukraine. Renewed conflict in the Middle East has pushed oil prices back above $100 a barrel, complicating the fiscal outlook. The Joseph Rowntree Foundation is a respected independent anti-poverty think tank whose reports carry significant weight in policy debates.
Key Perspectives
[Joseph Rowntree Foundation]: The think tank argues that without 'bold policy action,' the decline in living standards will be the largest since records began in 1961, calling the outlook for households 'dire.'
[The Government]: The government acknowledges the severity of the situation. Prime Minister Andy Burnham has promised a 'breathing space' in the budget, with Chancellor Healey offering new energy bill support. However, there is an internal tension, with Energy Secretary Miatta Fahnbulleh pushing for more drastic intervention than the Treasury is prepared to accept.
[Critics/Skeptics]: Critics, including some inside the government, argue that the planned interventions do not go far enough. The JRF study itself acts as a powerful critique of the pace and scale of the government's current response, highlighting that global price pressures may overwhelm modest domestic assistance.
What to Watch
- The specific measures announced in John Healey's budget, particularly the scale of energy bill support and the Warm Home Discount increase.
- The Bank of England's interest rate decisions as it responds to resurgent inflation driven by energy prices.
- The impact of the renewed Middle East conflict on global oil and gas prices in the weeks following the budget.