Britain’s great living standards slowdown

Last week we at Resolution Foundation published our final election briefing, in which we focused on a core issue for both the electorate, and indeed the Resolution Foundation – what was happened to living standards since 2010. Look away now if you’re hoping for some uplifting news.

Whoever we choose to lead this country at the general election this Thursday will need to have living standards growth at the top of their agenda – as we emerge from a parliament that is likely to have been one of the worst on record for rising living standards.

Since the 2019 election, disposable income growth has been non-existent. In the latest data available at the time of writing, Real Household Disposable Income (RHDI) per person was 0.6 per cent lower in Q1 2024 than at the previous election in Q4 2019. Although the definitive picture will not be available until later this year, it looks very likely that the last Parliament was the worst for living standards growth since the short 1950-51 Parliament (when rearmament ahead of the Korean War caused inflation to spike).

Looking beyond the course of the last Parliament - which saw a global pandemic, war in Europe, and an historic energy shock - income growth since 2009-10 has been positive, but still unusually low. Typical non-pensioner household incomes grew by just £1,900, or £140 in each year since then.

That’s weak by international standards: had we experienced the same level of growth in median incomes between 2007 and 2022 as the Netherlands, France and Germany, the UK’s median income in 2022-23 would be £2,700 higher than we’ve seen. And it’s weak by the UK’s historical standards too. Incomes grew by 7 per cent in the last fourteen years – in the fourteen years before that, they grew by 38 percent.

Britain’s hasn’t just experienced a great living standards slow down though, progress has also stalled on poverty reduction. The number of people living in absolutely poverty has fallen by 1.3 million since 2010. That may sounds good until you consider that in the 13 years prior to 2010, 7 million people were lifted out of absolute poverty. 

One piece of good news is that the income growth we have had over this period has been progressive – with lower income households seeing greater growth than higher income ones. Since 2009-10, the poorest fifth of households saw their incomes grow by 13 per cent, compared to 7 per cent for typical households, and 2 per cent growth for the richest 20 per cent. It’s worth noting that this progressive pattern has been shaped by the temporary Cost of Living Payments last year. If we omit those payments from our calculations, the poorest 20 per cent's incomes only grew by 7 per cent in 14 years – though still stronger than middle and higher income families

So, the main driver of stronger income growth since 2010 for poorer households has been greater employment growth among lower income households. This was particularly true during the 2010s, when Britain experienced a jobs boom – though around a third of that growth has been unwound during and after the pandemic. Getting employment rising again must be a top priority for the next government.

Income growth for poorer households since 2010 would have been even stronger – and remember: it's been weak, just not as weak as income growth middle and higher-income families – were it not for tax and benefit changes announced over this period.

As the chart below shows, these policies – including the four-year cash freeze to working-age benefits between 2016-17 and 2019-20 – have reduced incomes for the poorest households, while tax cuts like the reduction in the main rate of Employee National Insurance, have increased income across the rest of the distribution, especially for the most well-off households.

Whichever party forms the next government must be willing to take steps to boost living standards, so all families in the UK can experience shared growth. Huge thanks to the Nuffield Foundation who have funded our election analysis, all of which is available here.