As Chancellor John Healey prepares his first Budget, households across different income brackets are questioning how much further their finances can stretch. Official figures suggest that improvements in living standards will remain limited over the coming years.
Rising Household Bills Leave Families With Fewer Options
In Ipswich, Dawn Fazackerley-King, 42, is preparing for a potentially substantial increase in her family’s mortgage repayments. The interest rate on their home loan could rise from 1.4% to approximately 5.3%, adding around £250 to their monthly expenses. Dawn works full-time as a self-employed Pilates instructor, while her husband has an office job. Their combined annual household income is approximately £70,000, supporting two children aged six and eight.
According to BBC reporting, Dawn says her family has progressively reduced discretionary spending as household costs have increased. Regular expenses now largely consist of mortgage payments, council tax and energy bills, with little remaining for non-essential purchases.
“There’s just no more fat to trim,” she said, explaining that the anticipated mortgage increase would mean finding additional money simply to remain in their existing home.
Her experience reflects concerns identified in official statistics. According to the Office for National Statistics, 55% of adults reported an increase in their cost of living during August 2026, compared with 79% in April and 62% in August 2025. Among those experiencing higher costs, 94% identified food shopping as a factor, while 72% mentioned fuel and 64% pointed to gas or electricity bills.
The same survey found that 59% of adults were spending less on non-essentials, while 38% had reduced expenditure on food shopping and other essentials. Around 62% reported being worried about rising living costs.
Weak Income Growth Adds to Concerns Ahead of the Budget
Financial pressure also affects households earning considerably less. In Clacton-on-Sea, Essex, single mother Jessica Taylor, 41, earns approximately £26,000 annually and receives Universal Credit. Jessica told the BBC that she and her 11-year-old son live from month to month. Losing her job, she explained, would leave them with enough financial resources for perhaps one or two months.
She regularly searches for unrestricted parking spaces to avoid additional expenses and has sacrificed holidays to maintain activities and experiences for her son. Jessica and her mother, Karen Badenoch, 62, run Trusted Money Confidence, a community interest company offering free money-management sessions.
Karen says their sessions frequently involve employed people relying on credit cards and buy-now-pay-later arrangements to meet monthly expenses. According to the Office for Budget Responsibility, real household disposable income is expected to grow by an average of approximately 0.75% annually between 2026 and 2030. Between 2000 and 2007, the equivalent average exceeded 3% annually.
The OBR also forecasts average annual growth in real disposable income per person of less than 0.5% between 2025-26 and 2030-31. Healey has pledged that the Budget will maintain Labour’s commitment not to increase income tax, National Insurance or VAT while observing the government’s fiscal rules. For many British households, the approaching Budget comes after years of adjustments to everyday spending, with limited room remaining for further savings.
