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UK Living Standards Projected to Decline by 2030

Newly released data suggests that living standards for households across the UK are expected to deteriorate by 2030, with lower-income families experiencing a more rapid decline compared to their middle and higher-earning counterparts. This troubling forecast raises significant questions about Keir Starmer’s commitment to improving the financial well-being of working individuals.

The economic assessment, conducted by the reputable Joseph Rowntree Foundation (JRF), comes on the eve of Chancellor Rachel Reeves’ spring statement, where she is anticipated to unveil further public spending cuts rather than increasing borrowing or taxes, in adherence to the government’s stringent fiscal policies.

In a previous announcement, Prime Minister Starmer outlined a series of “milestones” to be achieved by the next general election, likely slated for 2029, with one of the primary goals being to “put more money in the pockets of working people.”

However, many Labour MPs have voiced their apprehension regarding Reeves’s strategy to generate approximately £5 billion through benefit reductions, which could impact disabled individuals significantly. Evidence indicating a potential decline in living standards, especially for the most vulnerable, may foster growing discontent within the party.

The analysis from JRF is based on the expectation that the Office for Budget Responsibility (OBR) will adjust its forecasts to align with those of the Bank of England and other key economic predictors, which is anticipated to lower the growth projection for this year from 2% to around 1%.

JRF’s findings paint what it describes as a “dismal reality,” suggesting that the previous year might set a peak for living standards during this parliamentary term. The report concludes that, by 2030, the average family could find itself £1,400 poorer, equating to a 3% decrease in disposable income. Furthermore, families on the lowest incomes are projected to suffer an annual loss of £900, or a 6% reduction in their spending power.

The report warns that if living standards do not improve by 2030, Starmer would not only fall short of his primary milestone but also lead the first government since 1955 that oversaw a decline in living standards throughout its entire parliamentary term.

Looking towards 2030 compared to 2025, it posits that mortgage holders could see an increase of approximately £1,400 in annual interest payments, while renters may face a £300 rise in yearly rent. Concurrently, average earnings may decline by £700 annually. The JRF emphasizes that the lowest income groups are particularly vulnerable to escalating housing costs, diminishing real wages, and stagnant tax thresholds.

Alfie Stirling, the JRF’s director of insight and policy, argued that further cuts are not a viable solution for reversing the trend of decreasing living standards. He recommended that Reeves should consider raising taxes for wealthier individuals instead.

Stirling stated, “The government is confronting an undeniable array of economic challenges, both domestically and internationally. However, how those challenges are managed reflects political choices.”

He added, “It is both misguided and counterproductive to attempt to mend public finances by reducing disability benefits. The government should directly address hardship and enhance living standards as part of a growth strategy.”

Additionally, a cohort of prominent economists recently warned in a letter to the Financial Times against the dangers of cutting spending or investments, stating that “the UK cannot cut its way to growth.”

Specifically, various sectors of unprotected government expenditure, such as prisons, justice, and local government—which has already experienced over 45% in real terms cuts since 2010—are expected to face more reductions, calling into question Starmer’s assertion that austerity measures would not be reinstated.

In her previous budget announcement, Reeves had established a “fiscal headroom” of £9.9 billion, or surplus funds, which was meant to align day-to-day spending with revenues. However, higher than anticipated borrowing costs and reduced growth forecasts have diminished this buffer, compelling her to seek fiscal restoration through either increased revenues or cuts—possibly both.

Leaders in local government are particularly concerned as they await the impending budget statement, fearing further cuts could jeopardize crucial funding and potentially drive many councils towards bankruptcy, thus impacting essential services like social care for the vulnerable population.

Councillor Louise Gittins, chair of the Local Government Association, emphasized, “Without substantial investment promptly, we risk failing to deliver vital services that residents depend upon, which hampers our ability to assist the government in achieving its future aspirations.”

Meanwhile, a recent Opinium poll for the Observer indicates that Labour’s reputation regarding economic management may be suffering after eight months in power, with no single party leader being deemed trustworthy on economic matters. Starmer (-32%) and Reeves (-38%) were rated the least trustworthy, while leaders from the Conservative party received similar ratings, albeit less severe.

In light of the prevailing sentiments, the Conservative party appears to be gaining a slight edge over Labour regarding perceived economic management and capability to enhance individual financial situations.

As the government grapples with the financial landscape, Chancellor Reeves stated that the country is facing a significant shortage of skilled tradespeople, such as engineers and electricians. In response, officials plan to invest £600 million to train an additional 60,000 construction workers to accelerate housing projects and stimulate economic growth.

Reeves stated: “We are committed to revitalizing construction in Britain, which means overcoming obstacles to build 1.5 million new homes and improve our infrastructure.”

She continued, “However, achieving this is contingent upon having enough skilled workers to carry out the projects, addressing the current shortages we face.”

A Treasury representative noted, “Real wages have been rising at the highest rate in six months, but this government inherited a landscape of the steepest drop in living standards since the ONS records began.”

They added, “Our top priority is to ensure individuals have more money available. Since the last election, we have seen three interest rate reductions, an unprecedented increase in the national living wage, and a guarantee that millions will experience a state pension rise of up to £1,900 during this parliamentary session, while maintaining working individuals’ payslips against high taxes.”

Source
www.theguardian.com