The Joseph Rowntree Foundation has warned that the UK faces a “dire” outlook for living standards unless the government takes decisive steps. Its analysis shows that, after housing costs, average household incomes could be between £440 and £770 lower in real terms by 2029‑30 than they were when Labour entered office two years ago. Even the lower end of that range would mark the biggest decline since modern records began in 1961, adding to the pressure already felt in the previous parliament.
Projected income squeeze
The foundation’s forecast hinges on two energy‑price scenarios from the Bank of England. With recent hostilities in the Middle East pushing oil back above $100 a barrel, the adverse scenario has become the more likely path. That drives up energy bills, which in turn feeds expectations of further interest‑rate hikes. Markets now price in four quarter‑point increases to the base rate, taking it to 4.75% by the end of 2027. As a result, the average five‑year fixed‑rate mortgage has already climbed to 6% – its highest level in three years.
What the government is proposing
Chancellor John Healey is set to deliver a budget that officials describe as modest, with major tax and spending decisions postponed until next year. He has pledged a “breathing space” for voters and is expected to announce £1 billion of extra support for energy consumers, most likely by raising the warm homes discount from £150 to £250. The Treasury has also pointed to recent measures such as removing VAT from electricity bills, capping bus fares in England at £2 from 2027, extending the 5p fuel‑duty cut and freezing rail fares and prescription charges as steps toward easing the squeeze.
Experts urge deeper intervention
Chris Belfield, the Joseph Rowntree Foundation’s chief economist, said: “Without bold policy action on living standards, families are set to be poorer than they were a decade ago. This is terrible both for families who are just treading water to get by and the more than 7 million families who are already routinely going without essentials like food and basic toiletries.” The think‑tank argues for a baseline supply of cheaper energy for all households, with extra allocations for those in greatest need. It also recommends re‑linking local housing allowance to average rents, boosting universal credit in line with the pandemic‑era Conservative approach, and funding these measures by aligning capital gains tax with income tax.
Why it Matters
If the projected income drop materialises, millions of households could find themselves unable to afford basics, deepening poverty and widening inequality across the UK. The warning from the Joseph Rowntree Foundation underscores that the cost‑of‑living crisis is not a temporary blip but a structural challenge that requires immediate, ambitious policy responses. Without such action, the gains made in recent years could be erased, leaving a lasting scar on the nation’s social fabric.
