The Joseph Rowntree Foundation has released analysis indicating that Britain faces a significant deterioration in living standards during the current parliament unless the government implements substantial policy changes. The thinktank projects that average household incomes, after accounting for housing costs, could fall between £440 and £770 in real terms by 2029-30 compared to when the Labour government assumed office two years ago. Even the lower figure would represent the largest decline in living standards since records began in 1961, compounding the squeeze experienced during the previous parliamentary term.
Rising energy and housing costs are the primary drivers of this outlook. The foundation based its analysis on Bank of England projections for energy prices, noting that recent geopolitical developments have tracked toward the more adverse scenario. Oil prices have surged past $100 a barrel following renewed Middle East hostilities, prompting expectations of interest rate increases to combat inflation. Mortgage costs have already climbed, with five-year fixed rates reaching 6% this week for the first time in three years.
The government has tasked Louise Haigh with leading cross-government taskforces focused on living standards improvement, with work expected to inform a 10-year economic plan later this autumn. The upcoming budget, scheduled for later this month, is anticipated to provide modest immediate support, including an additional £1 billion for energy consumers. The chancellor is reportedly considering raising the warm homes discount, a benefit program offering energy bill reductions, by £100, funded through taxpayer contributions.
The JRF has advocated for more ambitious interventions, recommending measures such as establishing baseline energy pricing for all households, adjusting housing allowances to reflect actual rents, and increasing universal credit. The foundation suggests these could be funded through tax adjustments including raising capital gains tax rates to match income tax levels. The government spokesperson emphasized existing support measures including VAT removal from electricity bills and capped bus fares, though concerns persist regarding whether current proposals adequately address the scale of the projected squeeze.
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