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Economic forecasts from leading think tanks have painted a bleak outlook for the coming years, warning of a “painful” and “depressing” period ahead as growth in living standards is expected to stall almost entirely. The Resolution Foundation predicts that typical working-age households will experience a decline in disposable income by £1,050 — a 3% drop — by 2029. The Institute for Fiscal Studies (IFS) has echoed this sentiment, describing the current decade as potentially the worst on record for household income growth.
Chancellor John Healey has described his recent Budget as providing some “breathing space,” yet acknowledged that the government cannot fully eliminate the ongoing cost of living pressures. The Office for Budget Responsibility (OBR), the UK’s official forecasting body, presented a “pretty grim picture” in their latest economic outlook. They attributed the challenging financial environment to rising borrowing costs and inflationary pressures, in part spurred by the conflict between the US and Iran.
In light of surging energy prices, Healey announced specific support measures, including a £100 payment to help ease the financial strain on households. However, analysts from the Resolution Foundation highlighted that this assistance is insufficient to counterbalance the impact of rising energy bills. Ruth Curtice, the think tank’s chief executive, summed up the situation by describing the parliamentary term as divided into two contrasting halves. The first half saw improvements in living standards, consistent economic growth, and increased public service funding, whereas the second half, she warned, would be considerably more difficult.
Adding to this, other experts expressed concerns over the government’s tight spending plans, suggesting that significant fiscal pressures are likely in the coming years. One commentator, Miller, noted that the planned spending appeared overly restrictive and unlikely to align with government preferences. She also emphasized that these plans are critical because they form the basis for reducing borrowing levels. Healey himself acknowledged on the BBC’s Today Programme that global “economic storms,” such as the Iran conflict and Russia’s invasion of Ukraine, are exerting widespread effects, and that the government aims to alleviate hardship where possible. Roughly 20 million households are expected to benefit from the £100 payment, allocated according to council tax bands.
Criticism of the Budget came from opposition figures as well. Conservative shadow chancellor Andrew Griffith argued that the measures had weakened the public finances by reducing the “headroom”—the financial buffer between government revenue and expenditure. Meanwhile, Liberal Democrat leader Ed Davey recognized the £100 energy payment as the clearest positive aspect of the Budget for many, but condemned it as “not good enough,” pointing to “stealth tax rises” that continue to erode people’s earnings
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