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There will be no improvement in living standards for Britain’s working-age families until the next general election, which is expected to be held in 2024, according to analysis published by a leading think tank.
While average wages are now rising faster than consumer prices, the gains will be offset by increases in taxes and mortgage payments and the end of government cost-of-living payments as inflation starts to recede, the Resolution Foundation said Wednesday.
About half of the £17bn a year increase in mortgage costs due to rising interest rates has yet to be passed on to households, the think tank said, as many have so far not renewed their fixed-rate mortgage deals.
Bills for those who need to remortgage next year could rise by £3,000, with typical disposable income for borrowers expected to be 7% lower in 2024-25 than in 2021-22.
The foundation also said that with the tax threshold frozen until 2028, growth in after-tax wages would be much lower than growth in gross wages. For those automatically enrolled in workplace pension schemes (whose contribution thresholds are also frozen), the real increase in take-home pay from 2019-20 to 2019-20 is likely to “Essentially zero.” 2024-25.
Real disposable income for typical working-age households is projected to be flat in 2024-25, having fallen by 4% over the past two years.
Even assuming the government increases working-age benefits under the policy next April, the poorest 50 per cent of households would benefit more from the one-off government support, but their disposable income would fall by about 1 per cent, the report said. Inflation rate for September.
“Millions of households would experience a steeper decline in income if the government went against the usual upward adjustments,” the foundation said.
At the same time, higher interest rates on savings will boost incomes for pensioners, wealthy households and those who already own their homes outright.
“The good news for the government is that the UK’s economic outlook is improving as we head into a crucial election year,” said Adam Colette, the foundation’s chief economist. “The bad news is that the outlook for living standards remains grim.”
Analysis by the think tank suggests Prime Minister Sunak will campaign against a bleak economic backdrop, although recent data revisions make Britain’s performance since the pandemic look stronger and in line with other advanced economies.
The foundation says the typical working-age population will be 4% poorer by 2024-25 than in 2019-20, making this parliament’s worst income growth on record.
“Not since comparable data began in the 1960s has a government held onto power with such weak median income growth in an election year,” the think tank noted.
The reporter contacted the Ministry of Finance for comment.
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