Labour could oversee worst parliament on record for living standards, study warns

Soaring energy and housing costs mean Labour could oversee the worst parliament on record for living standards, a stark analysis warns. With households facing a severe squeeze, expert bodies have raised the alarm over upcoming fiscal statements and long-term economic projections, highlighting mounting pressures on disposable incomes and departmental spending.

According to research from the Joseph Rowntree Foundation, average household incomes after housing costs are predicted to be between £440 and £770 lower in real terms by 2029-30 compared to when Labour took office. Even at the lower end of this projection, the decline would represent the largest drop in living standards since modern records began in 1961.

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Additional findings from the Resolution Foundation indicate that real household disposable income per person is forecast to grow by an average of just 0.5% a year over the course of the parliamentary term. While an improvement on negative growth seen in the previous parliament, it would still mark the second-worst parliament for income growth on record.

Chris Belfield, the chief economist at the JRF, warned about the wider impact of these trends.

"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."

Chris Belfield, the chief economist at the JRF

Economic forecasters have drawn stark contrasts between different analytical models, particularly regarding how housing costs are treated. While official frameworks and traditional think tank models utilize specific measures, the JRF’s focus on post-housing costs underscores the acute vulnerability of families navigating volatile energy and housing markets.

The wider economic backdrop has been heavily influenced by international events. Renewed conflict in the Middle East has pushed oil prices back above $100 a barrel, driving up energy costs and fueling expectations of higher interest rates. Financial markets have responded by pricing in potential base rate increases, while the average cost of a five-year fixed-rate mortgage recently touched 6% for the first time in three years.

Against this challenging environment, policymakers face competing demands over budgetary priorities. Cabinet discussions have involved exploring short-term cost of living measures alongside structural interventions. Government figures have weighed up options to support energy consumers, including potential increases to the warm homes discount funded by taxpayers.

At the same time, fiscal analysts have scrutinized the long-term sustainability of current spending plans. The Resolution Foundation warned that if defense spending rises and other departmental budgets are held to strict limits, unprotected areas such as local government and justice could face cuts equivalent to 88% of the average annual cuts seen during peak austerity years. Meanwhile, the Institute for Fiscal Studies cautioned that subsequent spending restraint baked into fiscal forecasts should be approached with a healthy dose of scepticism.

Government representatives have defended their approach, pointing to measures such as removing VAT from electricity bills, capping bus fares in England at £2 in 2027, extending the 5p fuel duty cut, and frozen rail fares and prescription charges to help alleviate immediate cost of living pressures.

Further developments are expected as the government prepares for upcoming fiscal statements, spending reviews, and the formal rollout of long-term strategic plans designed to address regional economic disparities and public service delivery.