The Resolution Foundation projects that a typical working-age household will lose about £1,050 a year by 2028-29, erasing most of the gains of the Parliament’s first years. The Institute for Fiscal Studies says the 2020s are on course to be the weakest decade for household incomes on record.
Households are about to get poorer, and the Budget on 28 October did little to stop it. The Resolution Foundation, a think tank focused on living standards, projects that the typical working-age household’s income will fall 3% between 2026-27 and 2028-29. That is about £1,050 a year, after housing costs.1
The fall follows a good start. The Foundation estimates that typical incomes rose 5.0% between 2023-24 and 2026-27. Over the full Parliament, it expects growth of just 1.8%, and all of it has already happened.1
Helen Miller, director of the Institute for Fiscal Studies, put it in longer terms the day after the Budget. This decade “looks set to be the worst decade for growth in household incomes on record”, she said, and “no amount of temporary cost-of-living packages will fix that”.2
The immediate cause is inflation. The Foundation says the war in the Middle East has pushed up import prices. In March the Office for Budget Responsibility expected consumer price inflation to peak at 2.1%. It now expects 3.8% in early 2027, with the 2% target not met until the third quarter of 2028.1
Wages do not make up the difference. The OBR expects average real weekly wages to slip 0.1% between 2026-27 and 2028-29, the Foundation says. Rents and mortgage payments are forecast to rise faster than prices in general, and taxes are rising too.1
That is why income growth lags the economy. The OBR sees output recovering by 2030. The Foundation says incomes grow much more slowly than GDP this decade “because of rising taxes and import prices”.1
Prices themselves are part of the story. The Foundation says the 2020s are set to see two decades’ worth of inflation: prices are forecast to rise 43% over the decade, against 22% if inflation had stayed at its 2% target throughout.1 Incomes have to climb a steeper hill than in earlier decades, and a weak labour market gives workers little leverage to climb it.
Across the whole decade, the forecast gain in real income per person is about £400, one-tenth of the growth rate of the 2010s.1
The Budget’s help is short-term. About 20 million households get £100 towards energy bills this winter, and gas standing charges are due to go.4 The Foundation calls the package “scattergun” and says it will not change the picture.4 It also expects typical energy bills of £1,750 in 2026-27 even after support.1
Business is also feeling the squeeze. The Confederation of British Industry’s chief executive, Rain Newton-Smith, said there was “nothing concrete” for most firms, and that UK companies pay energy bills a third higher than European counterparts.4 That matters for pay: firms facing higher costs have less room to raise wages, which is the missing ingredient in the forecast.
The politics are plain. Prime Minister Andy Burnham called the Budget “pretty bold” for helping 20 million households with energy costs.4 Yet a government that wants re-election faces an income profile that rises early and falls late. The Foundation calls the profile of this weak growth, a rise then a fall, the more alarming feature for a government seeking re-election.1
The Budget is progressive in one respect. The Foundation says it, with earlier Labour budgets, moves £320 a year to the poorest fifth, while most others lose.1 Redistribution between falling incomes, it argues, brings “shades of disappointment”.1
The Bank of England sets interest rates on 5 November, and our earlier piece set out why a rise is likelier. Ofgem announces the price cap for January to March 2027 on 25 November.6 The £100 energy payment is due in the coming weeks.2
The larger test is the next spending review, for which no date is public. Miller says the plans imply real-terms cuts to some public services, and that avoiding them could need a £17bn top-up.5 The Foundation says big tax and spending decisions have been put off until next year.1 Our earlier piece on the Budget’s spending pressures covers that squeeze.
Nobody has yet measured these incomes: they are forecasts, and they move with energy prices. The OBR’s inflation forecast used August prices, and the Bank expects a higher peak. The IFS and the Foundation give different figures for the 2010s, about 12% and 14%, and neither source sets out the reason for that gap here; both rank it among the weakest decades.