'Painful' years ahead, think tanks warn, as living standards set to fall
Budget forecasts show growth in living standards grinding almost to a halt.
Economic think tanks have warned people are in for a tough few years ahead, with living standards set to decline. The Resolution Foundation anticipates typical working-age households will experience a £1,050, or 3%, decrease in disposable income between now and 2029. The Institute for Fiscal Studies (IFS) declares this decade the worst for household income growth ever recorded.
Chancellor John Healey claims his Budget provides a temporary respite, but acknowledges the government cannot entirely eradicate rising living costs. The OBR, the UK's official forecaster, presents a bleak economic outlook, attributing the situation to higher borrowing costs and inflation stemming from the US-Iran conflict. Healey announced support measures like a £100 payment to alleviate household financial strain, yet claims it insufficient to counteract the impact of increased energy expenses.
The think tank's chief executive, Ruth Curtice, laments the upcoming era as one of two distinct halves, with the latter part proving challenging. The Treasury has refrained from pledging welfare bill reductions prior to the next election. Despite the government's measures, the Resolution Foundation maintains that households will still face higher energy prices than during the 2022 energy crisis.
Additionally, the OBR forecasts a slowdown in GDP growth, with the 2027 figure dropping from 1.2% to 1%. Inflation for 2027 is projected to rise from 2% to 3.4%. The OBR also highlights the challenges of economic forecasting, emphasizing uncertainty surrounding inflation's future trajectory.
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