Typical working-age households face a £1,050 drop in disposable income by 2029 as economic think tanks warn that the current decade is on track to be the worst for income growth on record, following Chancellor John Healey’s first Budget delivered in the Commons on Wednesday.
Resolution Foundation and IFS Forecasts on Household Disposable Income
Economic analysts have delivered grim projections for British households following Wednesday’s fiscal statement. According to the Resolution Foundation, typical working-age households will see their disposable income fall by £1,050, or 3 per cent, between now and 2029. Ruth Curtice, chief executive of the think tank, noted that the current parliament is increasingly resembling one of two halves, with living standards and growth expected to become tough going in the second half.
Concurrently, the Institute for Fiscal Studies warned that the current decade is shaping up to be the worst for household income growth on record. Helen Miller, Director of the IFS, told journalists during a briefing that the country is facing a depressing outlook, while Tom Wernham, an economist at the IFS, noted during the session that households are set to experience very little growth at all
in their incomes across the ten-year span.
This is looking like a really bleak decade for household income growth.
Tom Wernham, economist at the IFS
That projected 2 per cent growth over the decade stands in sharp contrast to the 2010s, which saw roughly 12 per cent growth despite being considered the lowest growth decade on record compared to all the other decades back to the 1950s. Households are additionally contending with rising energy costs, which are projected to increase by about £400 per home between now and next July. The Office for Budget Responsibility noted that real household disposable income per person is set to fall slightly in the near term before recovering partially as energy price shocks ease, though it will sit only around 2 per cent above pre-pandemic levels by 2030-31.
Chancellor John Healey’s Cost-of-Living Measures and Fiscal Headroom
Healey hiked taxes on banks and gambling firms to provide what he promised would be breathing space for households and high street businesses during difficult economic times.
Mr Burnham brushed off analysis pointing to a grim economic outlook, stating that the British economy is defying forecasters’ expectations and growing more strongly. He pointed out that the International Monetary Fund recently identified the nation as a standout for deficit reduction, while acknowledging that the global environment remains difficult due to impacts from the Middle East. Meanwhile, the IFS criticized the fiscal strategy for relying on temporary fixes.
The Chancellor’s choices have also narrowed the government’s financial buffer. The Office for Budget Responsibility reported that fiscal headroom has been slashed by over £8 billion to £15 billion in the 2029-30 fiscal year, down from the March estimate under Rachel Reeves. IFS leadership warned that a lower buffer leaves the Chancellor more exposed to future bad news.
Government Cuts Capital Budgets to Raise £3 Billion
To balance spending commitments—including funding required as departments across government face real-terms pressures—officials are turning to departmental budget reductions. Government departments will be asked to reduce their capital budgets by 1 per cent each between 2027-28 and 2029-30 to raise approximately £3 billion.
Ms Miller warned that public services will see real-terms cuts in upcoming spending reviews while history warns analysts to be sceptical of tight spending plans in later forecast years.
The OBR forecast that the total cost of health-related benefits, encompassing sickness benefits and personal independence payments, is projected to reach £105bn by the 2028-29 financial year.
Prime Minister Burnham emphasized that the UK is not immune to financial pressures originating from the Middle East and the resulting impact on fuel and energy costs, as the government manages global economic volatility.