Think Tanks Warn of 'Painful' Economic Years as Living Standards Growth Stalls

Economic forecasts suggest that the UK is entering a difficult period, with several think tanks warning that growth in living standards is nearly stationary. The Resolution Foundation projects that typical working-age households could see their disposable income fall by £1,050, or 3%, between now and 2029. Adding to the concern, the Institute for Fiscal Studies (IFS) described the outlook as 'depressing,' stating that the current decade is set to be the worst for household income growth on record. Helen Miller, director of the IFS, emphasized that temporary cost of living packages alone cannot solve the issue and that a stronger economy is required. Chancellor John Healey defended the recent Budget, arguing that it provided 'breathing space' for households, though he conceded that government action could never completely eliminate cost of living pressures. In response to rising energy costs, the government announced measures, including a £100 support payment aimed at easing financial strain on approximately 20 million households. However, critics argue that the government's response is insufficient. The Resolution Foundation noted that even with the support measures, households will continue to face higher energy bills than those experienced during the 2022 energy crisis. The think tank also stated that incomes for non-pensioner households are projected to rise by only a 'paltry' £600 over the course of the current parliament. Official forecasts from the Office for Budget Responsibility (OBR) paint a grim picture for the wider economy. The OBR projected a slowdown in GDP growth, falling from 1.2% in 2026 to 1% in 2027, and raised its inflation forecast for 2027 to 3.4%. Furthermore, the OBR found that living standards for all households would barely grow, by less than 0.1% per year, over a ten-year rolling average. Political reactions to the economic data and the Budget have been mixed. Conservative shadow chancellor Andrew Griffith argued that the Budget has made public finances more fragile, while Liberal Democrat leader Ed Davey suggested the £100 energy payment, while helpful, was 'not good enough' when considering rising 'stealth tax rises.' The Resolution Foundation concluded that the second half of the current parliament is likely to be 'tough going' for the public.