Economic Think Tanks Warn of 'Painful' Years Ahead Amid Grim Forecast of Falling Living Standards

Economic forecasts suggest that the UK is entering a challenging period, with several think tanks warning of a significant decline in living standards. The Resolution Foundation projects that typical working-age households could see their disposable income fall by £1,050, or 3%, between now and 2029. The Institute for Fiscal Studies (IFS) echoed this pessimistic outlook, stating that the current decade is set to be the worst for household income growth on record. Helen Miller, director of the IFS, asserted that temporary cost of living packages alone cannot resolve these structural issues, emphasizing the need for a stronger economy. The Office for Budget Responsibility (OBR) also painted a grim picture, attributing the difficult financial situation to higher borrowing costs and inflation exacerbated by global conflicts, including the US-Iran war. The OBR's latest forecast projects a slowdown in GDP growth, falling from 1.2% in 2026 to 1% in 2027, while inflation for 2027 is forecast to rise to 3.4%. In response to rising energy prices, Chancellor John Healey announced measures intended to ease financial pressure, including a £100 support payment aimed at approximately 20 million households. Healey stated that his Budget provided 'breathing space,' though he acknowledged the government could never completely eliminate cost of living pressures. However, the Resolution Foundation criticized the government's approach, describing the Budget as a 'scattergun' response that failed to adequately address the challenges. Ruth Curtice, the Resolution Foundation's chief executive, noted that incomes for non-pensioner households are expected to rise by only 'a paltry' £600 over the course of the parliament, with energy bills remaining higher than they were during the 2022 energy crisis. Opposition leaders also voiced concerns over the government's fiscal strategy. Conservative shadow chancellor Andrew Griffith argued that the Budget left public finances more fragile by reducing the country's financial buffer. Liberal Democrat leader Ed Davey acknowledged the £100 payment but criticized it as insufficient when weighed against 'stealth tax rises' affecting personal take-home pay. While the OBR noted the inherent difficulties in economic forecasting, highlighting potential volatility in inflation, the overall consensus among analysts remains one of significant economic strain. The IFS and Resolution Foundation suggest that without fundamental changes, the second half of the current parliament will be 'tough going' for the public.