Think Tank Calls for Policy Shift to Address Living Standards Crisis
Government policy must pivot from managing scarcity to actively reducing the cost of essential goods and services to improve living standards for lower-to-middle income households, according to a new report from centre-right think tank Bright Blue. The analysis argues that focusing on energy costs and housing affordability—two areas where the UK lags significantly behind international peers—is crucial for economic recovery.
Stark Disparities in Essential Spending
Bright Blue's research reveals that combined housing and energy costs in the UK are a staggering 44 per cent higher than the OECD average. This burden falls disproportionately on poorer households, who allocate a much larger share of their income to these essentials. The report found that low-to-middle income households spent 8.5 per cent of their disposable income on energy in 2023-24, up sharply from 5.9 per cent in 2019-20. In contrast, households earning above the median income spent just 5.6 per cent on energy in 2023-24.
Regarding housing, the poorest quarter of the population spent over one-fifth (21 per cent) of household income on housing costs—three-and-a-half times more than the richest quarter. "While real incomes have stagnated for most income brackets in the UK, costs for low-to-middle income households have uniquely risen," said Bartek Staniszewski, head of policy at Bright Blue.
"Policymakers urgently need to focus on striving for plenty rather than just managing scarcity as a means of significantly improving living standards for low-to-middle income households," Staniszewski emphasized.
Proposed Housing Market Reforms
To address housing affordability, Bright Blue recommends several structural changes. First, Local Planning Authorities (LPAs) should be prevented from blocking housing developments unless a Local Development Order (LDO) is already established. An LDO is a planning document that specifies approved development types in specific areas, eliminating the need for developers to seek individual planning permission.
This reform would significantly limit local councils' ability to obstruct new housing projects, moving the planning system closer to a zonal approach. Additionally, the think tank proposes that the government commit an extra £163 million annually to fund 7,500 new planners in LPAs to address capacity issues. The Royal Town Planning Institute reports that a quarter of planners left the public sector in the seven years leading up to 2020, placing the system under considerable strain.
Bright Blue also advocates reforming Building Safety Regulations to eliminate the requirement for buildings over 60 meters tall to have two staircases. This safety policy has constrained new housing supply, particularly in London, exacerbating affordability challenges.
Urgent Energy Market Overhaul
On energy, the think tank calls for "urgent" government action to decouple electricity prices from wholesale gas prices. The UK's wholesale electricity market operates under a marginal pricing system, where the system price is set by the most expensive source of electricity—typically gas. Gas set prices 88 per cent of the time in 2015, increasing to 97 per cent in 2021, despite accounting for only 40 per cent of total electricity generation between 2017 and 2021.
To address this, Bright Blue recommends forming a government-backed Electricity Pricing Commission within the Department for Energy Security and Net Zero (DESNZ). This commission would investigate alternative pricing approaches and have a mandate to recommend a new model for government adoption. It would possess the authority to launch inquiries and be required to deliver definitive recommendations within three years of its establishment.
The report underscores that without these targeted interventions, the living standards gap will continue to widen, undermining economic stability and social cohesion. By prioritizing affordability in housing and energy, policymakers can create a more equitable economic landscape for all households.
