A brighter shade of grey - Living Standards Outlook

A panel event discussing the Resolution Foundation's LIving Standard Outlook, released in August 2024.

1. August 24 @resfoundation A brighter shade of grey? The current outlook for living standards Clare Moriarty, Chief Executive of Citizens Advice Sonia Sodha , Chief leader writer and columnist, the Observer Alex Clegg, Economist at the Resolution Foundation Chair: Mike Brewer, Interim Chief Executive of the Resolution Foundation

2. 2 @resfoundation The worst economic inheritance since the war? Or is the economy ‘going gangbusters’?

3. 3 Real growth in median equivalised household disposable income after housing costs for non-pensioners: GB/UK Notes: Deflated using our after housing costs deflator, based on CPI. GB up to 2001-02, UK from 2002-03. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation More than half of this Parliament’s income growth is set to happen this year

4. 4 Annual growth in real average weekly earnings: GB Source: ONS, AWE; Bank of England, Monetary Policy Report, August 2024; OBR, Economic and Fiscal Outlook, March 2024. @resfoundation The weak outlook is primarily down to sluggish Bank (and OBR) real wage forecasts

5. 5 Average proportion of net household income spent on housing costs, by tenure: GB/UK     Notes: GB before 2002-03. 2023-24 to 2029-30 data is projected. In addition to rents and mortgage interest, housing costs include water rates, structural insurance premiums, ground rent and service charges. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; ONS, Price Index of Private Rents; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation Rents are set to rise relative to incomes and average mortgage payments are not forecast to come down

6. 6 Projected annual growth in earnings, tax and housing costs for an illustrative worker on the median wage, privately renting   Notes: Deflated using our after-housing costs deflator, based on CPI; tax is Income Tax and National Insurance (outside of Scotland); rent is the average rent for a one-bedroom property in England. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; ONS, Price Index of Private Rents; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation The tax threshold freeze and rising housing costs are set to weigh on disposable incomes

7. 7 Projected annual growth in earnings, tax and housing costs for an illustrative worker on the median wage, privately renting   Notes: Deflated using our after-housing costs deflator, based on CPI; tax is Income Tax and National Insurance (outside of Scotland); rent is the average rent for a one-bedroom property in England. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; ONS, Price Index of Private Rents; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation The tax threshold freeze and rising housing costs are set to weigh on disposable incomes

8. 8 Annual real growth in average equivalised household disposable income for non-pensioners, after housing costs, by income vigintile: UK Notes: The bottom 5 per cent are excluded due to concerns about the reliability of data for this group. Deflated using our after housing costs deflator, based on CPI. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation The outlook for incomes is very bad for the bottom end of the distribution

9. 9 Cumulative change in real equivalised household disposable income since 2004-05, after housing costs: UK Notes: GB before 2002-03. Deflated using our after housing costs deflator, based on CPI. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation Incomes for poorer households are currently projected to fall back after rising from 2018-19 to 2021-22

10. 10 Proportion of people living in relative and absolute poverty, after housing costs: GB/UK Notes: GB before 2002-03. 2023-24 to 2029-30 data is projected. Relative poverty is defined as having an income below 60 per cent of the median income in a given year. Absolute poverty is defined as having an income below 60 per cent of the median income in 2010-11, adjusted for inflation. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation This means the outlook for poverty is bad

11. 11 Real equivalised median household income for non-pensioners: GB/UK Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model, ONS data, Bank of England and OBR forecasts. @resfoundation Faster wage growth would improve the outlook for incomes

12. 12 Proportion of people living in relative poverty, after housing costs: GB/UK Notes: GB before 2002-03. 2023-24 to 2029-30 data is projected. Relative poverty is defined as having an income below 60 per cent of the median income in a given year. See annex for details on the scenarios presented. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation Benefit reforms would improve the outlook for relative poverty

13. 13 Proportion of people living in relative poverty, after housing costs: GB/UK Notes: GB before 2002-03. 2023-24 to 2029-30 data is projected. Relative poverty is defined as having an income below 60 per cent of the median income in a given year. See annex for details on the scenarios presented. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation Benefit reforms would improve the outlook for relative poverty

14. 14 Proportion of people living in relative poverty, after housing costs: GB/UK Notes: GB before 2002-03. 2023-24 to 2029-30 data is projected. Relative poverty is defined as having an income below 60 per cent of the median income in a given year. See annex for details on the scenarios presented. Source: RF analysis of DWP, Households Below Average Income; and RF projection including use of the IPPR Tax Benefit Model; Bank of England, Monetary Policy Report, August 2024; and OBR, Economic and Fiscal Outlook, March 2024. @resfoundation Benefit reforms would improve the outlook for relative poverty

15. 15 @resfoundation Conclusion This year is looking strong for income growth, but this is set to quickly tail off from next year, with lacklustre growth projected for the rest of the Parliament As things currently stand, living standards would be held back by rising housing costs and tax increases And lower incomes are set to fall in real terms under current policy assumptions The Government will need to boost growth and enact policy reforms if it is to beat the forecasts