Household income likely to ‘fall by £2,000 a year’

Households’ average incomes likely to fall by more than £2,000, a leading thinktank has warned.

According to the Resolution Foundation, typical disposable incomes for working-age family households are on track to fall by 3 per cent in this financial year, and by 4 per cent in the year to April 2024.

Only incomes of the very richest will rise, according to the thinktank’s annual Living Standards Outlook for 2023, while middle-income households will struggle to make ends meet after an average £2,100 loss.

The warning comes amid a rash of strikes by workers demanding pay rises closer to the average inflation rate of 10.7 per cent.

The thinktank said that while the headline rate of inflation was likely to fall over the coming months in response to tumbling international gas and petrol prices, the cost of living would still remain cripplingly high for many households.

Energy bills are expected to increase after “the slimming down of government support”, pushing the typical energy bill to rise from £2,000 in 2022-23 to £2,850 in 2023-24.

A freeze on income tax thresholds will also increase tax bills for a middle-income household by around £700 from April, while rising mortgage costs will lead to a 12 per cent fall in real incomes over a two-year period for the 3m households forced to refinance their mortgage loans, stated The Guardian.

The estimated 7 per cent fall in living standards over two years is worse than the post-financial crisis squeeze, which resulted in a 5 per cent slump between 2009-10 and 2011-12.

“When combined with a weak recovery from 2024 onwards, [it] would leave typical household incomes still below pre-pandemic levels even by 2027-28,” the report said.