New research shows that incomes will be down under Andy Burnham’s party
Prime Minister Andy Burnham has been urged to cut energy bills (Image: Getty)
British households will be up to £770 worse off by the time of the next election compared with when Labour came to power. It means the UK faces “the worst parliament for living standards since modern records”, according to a new analysis.
The soaring cost of energy caused by the ongoing war in the Gulf is part of the problem, the study by the Joseph Rowntree Foundation warned. But it also highlighted poor wage growth and higher taxes. With Chancellor John Healey set to deliver his first Budget on October 28, it warned voters would punish Labour unless it took steps to cut the cost of living, including cutting energy bills.
The think tank said in a new report: “The worst parliament on modern record for real incomes is a tough record to defend at the ballot box.” It highlighted “slow growth in nominal earnings, combined with high inflation, which is driven by housing and energy costs, in particular”. Wages have risen more slowly than household costs, the report said. It added: “On top of this, taxes on incomes have had to rise to fund public services.”
The report said: “Taking the parliament as a whole, incomes after housing costs in 2029-30 are now expected to be between £440 and £770 a year lower than they were in 2024-25.
“Either scenario would represent the worst parliament for living standards since modern records began in 1961.”
The next election is due to take place in 2029 at the latest, although Prime Minister Andy Burnham could choose to go to the polls sooner.
Chris Belfield, chief economist at the Joseph Rowntree Foundation, said: “We can’t expect people to be their most productive if they’re running on fumes while they struggle to make ends meet. Without bold policy action on living standards, families are set to be poorer than they were a decade ago.
“This is terrible both for families who are just treading water to get by and the more than seven million families who are already routinely going without essentials like food and basic toiletries.”
The think tank urged the Chancellor to cut household energy costs by removing levies from electricity bills, and providing a cash payment linked to historic consumption.
Conservative Shadow Chancellor Andrew Griffith said: “Families are struggling to make ends meet, but Labour’s only answer is to hike taxes and make them pay even more to bail out Benefits Street.
“Instead, Labour should focus on growing the economy so everyone can benefit. They should adopt our plans to get young people into work, cut the tax burden and scrap red tape that is stopping the delivery of new homes. And they should follow our Cheap Power Plan, including getting Britain drilling in the North Sea, to cut household energy bills by £200.”
The findings came as a separate study by the Resolution Foundation found that high levels of inflation linked to the Covid pandemic and wars in Ukraine and the Middle East had left the average British household £2,900 worse off, compared with a scenario where inflation rose more slowly.
James Smith, chief economist at the Resolution Foundation, said: “It is poorer families who have cut back hardest on heating and are falling behind fastest on essential bills, and the conflict in the Middle East is set to keep energy prices high.”
In another sign that households are struggling, credit card defaults increased in the three months to the end of August.
Banks and building societies expect defaults to increase further in the three months to the end of November, a survey by the Bank of England found.
The Chancellor may have little room to manoeuvre in his Budget, with government debt running at just below £3trillion at the end of August 2026. The UK borrowed over £18billion in August 2026, up £2.9billion on the same month last year.
Mr Healey stressed during his speech to Labour’s conference earlier this month that he and the Prime Minister are “in lockstep that we will meet the fiscal rules”. These are that day-to-day spending should be funded by taxation, not more borrowing, by 2029-30, and the debt should be falling. In practice, the rules limit spending by preventing borrowing.
Analysts at Oxford Economics said: “Our view is that this month’s Budget will be a low-key affair aimed at offering markets reassurance about the Government’s commitment to fiscal sustainability.”
The Treasury highlighted measures it says are helping with the cost of living, including removing VAT from household electricity bills from October 1, capping bus fares at £2 and cutting business rates for pubs, social clubs and high-street businesses.
Conservatives this week pledged to axe a tax on packaging, the extended producer responsibility levy, which they said would help with the cost of living by ending a £1.5billion-pound annual burden on business. The Bank of England has estimated the so-called “grocery tax” adds about 0.5 percentage points to food inflation.