This eighth annual state of the nation report on UK living standards provides a detailed analysis of the state of UK living standards now and also what might happen over the next few years. Following a year of significant change that reinforced the crucial role of living standards in shaping politics on both sides of the Atlantic, and with the formal process of leaving the European Union expected to begin soon and to last right through the remainder of this Parliament, this report assesses the factors likely to affect households over that time period.
The extensive analysis is underpinned by two pieces of modelling which aim to, first, ‘nowcast’ household incomes as reported in the Family Resources Survey 2014-15 into 2015-16 and then 2016-17, and secondly, to forecast outcomes through to 2020-21. The report projects that income growth will slow for the typical working age household over the next four years, once housing costs are taken into account. This overall weak growth also hides a division between growth for some and falling living standards for others. The projections suggest that incomes will rise slowly for high income households, stagnate in the middle and fall at the bottom. Very significant cuts to working-age welfare of over £12 billion are a key component of what looks set to be falling living standards for almost the entire bottom half of the working-age income distribution between this year and 2020-21. The result is the biggest rise in inequality since the late 1980s.