New official statistics have laid bare a sustained decline in British living standards, revealing that the average person now has significantly less money to spend each month than they did just a few years ago.
A Sustained Squeeze on Household Finances
According to updated data from the Office for National Statistics (ONS), the amount of money people have left after tax and benefits, known as disposable income, is now more than £20 lower per month than it was in December 2019, after adjusting for inflation. The figures show disposable income is currently £1 lower per month than in summer 2019.
This follows three consecutive quarters of falling living standards, with the average person having £38 less to spend each month after tax compared to the end of 2024. Disposable income is the crucial sum from which all essential costs like rent, mortgages, council tax, food, and energy bills must be paid.
Historical Context and Expert Analysis
The data confirms a troubling economic trend. The previous parliament, from December 2019 to July 2024, was the first in recorded British history to oversee a fall in real-terms disposable income. Since the 1950s, there have been only five other occasions where disposable income fell for three quarters in a row, with three of those occurring in the 2010s.
Simon Pittaway, Senior Economist at the Resolution Foundation, told Sky News: "Today's ONS data confirms that Britain's mini living standards bounce in 2024 is well and truly over. Growth has been poor this year and prospects for 2026 aren't looking great either."
He highlighted a deeper structural issue: "Britain's big problem is that the country experienced three once-in-a-generation economic shocks in less than two decades [the 2008 financial crash, Brexit, and the cost of living crisis/COVID], with people in their mid-late 30s having spent their entire working lives lurching from one national crisis to another."
Government Response and Future Outlook
A spokesperson for the prime minister responded to the figures by stating: "Living standards dropped last parliament, but we're working to improve them." They pointed to measures in the recent budget, including help with energy bills and rail fares, rises in the national living wage, and a series of interest rate cuts since the election.
However, independent analysis presents a sobering forecast. Following November's budget, the anti-poverty think tank the Joseph Rowntree Foundation projected that living standards would fall by £850 a year over the course of this parliament. They noted that policies like lifting the two-child benefit cap would make the decline "less painful" for low-income households, but warned that frozen tax thresholds would push many into paying thousands more in real terms by the next election.
Despite the recent quarters of decline, overall living standards remain higher than when the current government took office, due to rapid growth in its first six months. The UK is currently the fourth-fastest growing economy in the G7, behind the US, Japan, and Canada, though inflation has risen recently to 3.2% in November.
