Labour could oversee worst parliament on record for living standards, study warns
Source: Guardian Econ ↗
Labour’s upcoming stewardship of the UK economy is set to coincide with what the Joseph Rowntree Foundation (JRF) describes as the steepest decline in living standards since modern records began in 1961. The think‑tank’s analysis, released three weeks before Chancellor John Healey’s budget, projects that average household incomes will be £440‑£770 lower in real terms by 2029‑30 than when Labour took power in 2024, after accounting for soaring energy and housing costs. The forecast places the nation on track for the “worst parliament for living standards in modern times”, a scenario that would eclipse the squeeze experienced under the previous Conservative government. Labour’s first secretary of state, Louise Haigh, has been tasked by Mayor Andy Burnham with leading two cross‑government taskforces—one focused on short‑term cost‑of‑living relief for housing and energy, the other on longer‑term structural reforms such as greater public control of utilities—to shape a 10‑year plan expected later this autumn.
The JRF warns that without bold policy action, families could be poorer than a decade ago, exacerbating hardship for the more than seven million households already missing essentials. Its modelling uses the Bank of England’s “central” and “adverse” energy‑price scenarios, noting that real‑world developments have tracked the adverse path as oil prices surged above $100 a barrel following renewed Middle‑East hostilities. Higher energy costs are expected to push the Bank to raise interest rates, with markets already pricing in four quarter‑point hikes to 4.75% by the end of next year, driving five‑year fixed‑rate mortgage costs to 6% for the first time in three years. Forecasts suggest a typical dual‑fuel bill could rise 16% to around £2,000 annually in early 2025, prompting the JRF to call for a more ambitious energy package than Healey appears prepared to deliver, including a baseline cheap‑price energy supply for all households and larger discounts for those in greatest need.
In response, Burnham has pledged a “breathing space” for voters, and Healey is expected to allocate an additional £1 billion to energy consumers at the budget, though internal debate persists over the adequacy of that sum. The chancellor is reportedly reluctant to follow Energy Secretary Miatta Fahnbulleh’s suggestion to eliminate levies from bills entirely, with the most likely measure being an increase to the Warm Homes Discount by £100, funded by taxpayers. The JRF also recommends relinking Local Housing Allowance to average rents, boosting Universal Credit to pandemic‑era levels, and financing these steps through reforms such as aligning capital‑gains tax with income tax. While the budget is anticipated to be modest, with major tax and spending decisions deferred to next year—including the implementation of a 3%‑of‑GDP defence spending target—the analysis underscores the urgency of decisive action to avert a historic erosion of living standards.
⚡ Effects Interpreter
🌍World Economylow impact
What this means for you
- ▶Supply chains stretching across continents may feel a subtle strain.
- ▶Ripples from this can reach factories and ports far away.
🏙️Local Economylow impact
What this means for you
- ▶The corner shop's prices are typically the last to move, but they do move.
- ▶Local hiring plans may firm up or soften as the wider trend becomes clear.
🏦Rates & Bankslow impact
What this means for you
- ▶Borrowing costs may hold steady for now, but they can turn on fresh news.
- ▶Fixed and variable borrowers alike may want to keep half an eye on this.
❤️Healthmedium impact
What this means for you
- ▶A little perspective usually helps once the initial shock fades.
- ▶Keeping a normal routine typically helps steady the nerves during unsettling news.
💷Wealthmedium impact
What this means for you
- ▶Diversified savings usually cushion the blow from stories like this.
- ▶It's a reasonable moment to check your investments are still on track.
🏠Housinglow impact
What this means for you
- ▶House prices and rents are unlikely to shift the moment this news breaks.
- ▶The property market tends to move slowly, so expect any change to take time.
🌍 Effects for your country
The U.S.'s central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The U.S.'s economy is growing at 2.3% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the U.S.'s own central bank rate closely. With the U.S.'s unemployment at 4.4%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the U.S. depends more on local healthcare capacity than the figures above.
The UK's central bank rate currently stands at 3.75%, so a global rates move like this could feed through to local borrowing costs. The UK's economy is growing at 0.8% with inflation at 3.2%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UK's own central bank rate closely. With the UK's unemployment at 5.6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in the UK depends more on local healthcare capacity than the figures above.
France's central bank rate currently stands at 2%, so a global rates move like this could feed through to local borrowing costs. France's economy is growing at 0.9% with inflation at 1.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track France's own central bank rate closely. With France's unemployment at 7.9%, personal-finance effects like this land on a labour market that is already under strain. Health-system effects are harder to localise from economic indicators alone — the real impact in France depends more on local healthcare capacity than the figures above.
Romania's central bank rate currently stands at 6.5%, so a global rates move like this could feed through to local borrowing costs. Romania's economy is growing at 0.7% with inflation at 7.8%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track Romania's own central bank rate closely. With Romania's unemployment at 6%, personal-finance effects like this land on a labour market that is currently fairly stable. Health-system effects are harder to localise from economic indicators alone — the real impact in Romania depends more on local healthcare capacity than the figures above.
The UAE's central bank rate currently stands at 3.65%, so a global rates move like this could feed through to local borrowing costs. The UAE's economy is growing at 3.1% with inflation at 2.5%, the backdrop this story's effects play out against locally. Housing-market effects like this are usually felt most where mortgage rates track the UAE's own central bank rate closely. Health-system effects are harder to localise from economic indicators alone — the real impact in the UAE depends more on local healthcare capacity than the figures above.