A new report from the Joseph Rowntree Foundation (JRF) has revealed that the average UK family is set to lose £1,400 a year by 2030. This stark prediction comes amidst ongoing concerns over the country’s economic outlook, with inflation, frozen tax thresholds, and rising housing costs likely to leave households struggling.
The analysis suggests that the most vulnerable families will bear the brunt of this economic squeeze, with the poorest third of the population expected to face financial hardships at double the rate of wealthier households.
The report also indicates that the Labour government’s goals of raising living standards before the next election are unlikely to be achieved, raising questions about the effectiveness of current policies.
Rising Costs and Stagnant Earnings
According to the JRF’s analysis, a combination of rising mortgage and rent costs, alongside stagnating wages, will leave many families worse off over the next five years. Frozen tax thresholds mean that workers will see their income squeezed further, pushing them into higher tax bands without any corresponding increase in disposable income.
For the poorest households, the situation will be especially dire. The analysis predicts that low-income families will lose £900 annually, representing a 6% fall in disposable income.
By comparison, the average family’s income is expected to drop by £1,400, or a 3% reduction. These figures reflect a broader trend of declining real wages, with the JRF forecasting a £700 reduction in average earnings by 2030.
The report’s stark predictions are compounded by the government’s recent announcement of a £5 billion cut to disability benefits, which could exacerbate financial difficulties for the most vulnerable members of society. These cuts, alongside stagnant wages and rising living costs, paint a bleak picture for UK households in the coming years.
Political Response and Economic Pressures
The political implications of these findings are significant. Alfie Stirling, Director of Insight and Policy at JRF, has warned that Labour risks presiding over the first parliament in modern history to see a decline in average living standards from start to finish. While Labour has denied the claims that living standards are falling,
Chancellor Rachel Reeves has faced criticism for ruling out any further tax increases, despite the growing need for funds to support struggling families.
As the government grapples with a sluggish economy, economic growth projections for the UK have been downgraded by the Bank of England, with growth now expected to be just 0.75% for the year. Moreover, upcoming hikes in employer national insurance and the minimum wage could further dampen investment and hinder economic recovery.
