Benefits of PM’s plan for change must be felt by worst off, as bottom 40% face further drop in living standards

• Latest research from October 2024 finds hardship is embedded in the UK, with around 7m low-income households going without essentials. This number has barely moved for three years.
• 5.4 million low-income households said they were unable to afford enough food in the past 30 days.
• Looking forward, no households across the income distribution see any rise in their disposable incomes once housing costs are taken into account, but for the poorest 20% there is a significant proportionate fall.

As the Prime Minister prepares to announce a new Plan for Change, millions of families will struggle to feel any benefits of growth as living standards are currently predicted to fall without urgent action.

New analysis by JRF finds households in the bottom 40% of incomes are on average around £300 worse off than they were before the COVID-19 pandemic. They are forecast to be £750 worse off by 2029.

JRF is concerned this could see even more families going without everyday essentials like food, heating or basic toiletries. Our latest survey found seven million households in the bottom 40% of incomes went without at least one essential in the past six months.

70% of Labour voters in the 2024 election will consider not voting for them again if progress isn’t made on tackling the cost of living.¹   

The lowest-income households are forecast to be hit hardest over this parliament. The bottom fifth are set to see a real reduction of around 7 percentage points in their disposable incomes, after housing costs, compared to middle earners whose disposable incomes will stabilise.

A key reason behind this fall is that housing costs are set to continue to rise steeply, as incomes fail to keep up. By 2029, housing costs for the bottom 40% of households will be on average £470 higher per year than they were a decade before.

High housing costs outstripping what low-income households can afford mean higher levels of hardship for these groups:

• 76% of low income renters and 71% of low income mortgage holders reported going without essentials in the six months to October 2024, more than twice the rate of low income households who own their homes outright (37%).
   
• Just over half of low-income renters (52%) and 44% of low income mortgage holders are in arrears with at least one household bill or credit commitment in October 2024, around three times the rate of low income households who own their homes outright (16%).

Some families are more at risk of going without the essentials than others:

• 85% of low-income families with three or more children were going without essentials in the six months to October 2024, compared to 52% of families with no children
• 62% of low-income families with three or more children were in arrears on at least one household bill or lending commitment in October 2024, compared to 27% of families with no children, more than twice as many.

Commenting ahead of the Prime Minister's speech, Rachelle Earwaker, JRF senior economist said:

"Improving living standards for the country is critical if the Government is to meet their targets for economic growth. But the dial won’t shift if they ignore the seven million low-income households still going without essentials, or the housing costs that are set to drive a decline in living standards over this parliament. Tackling the high cost of living is what people expect as the top priority of this Government and if no improvement is felt there will be a political as well as a moral cost.

"If the Government fails to address current levels of hardship and ensure that households have money left in their pockets after paying their rent or mortgage, then more and more families will face the indignity of not being able to pay their bills or afford all the essentials, like warm clothes or hot showers, because there simply isn't support available.

"The Government should take this chance to make sure that improving living standards for low and middle income families are at the heart of improving economic growth for the country. To do this, they must take action to protect the households on low incomes who are set to see the biggest declines in living standards, and work to embed economic security for all."