ONS June 2023 data shows RHDI per capita fell 1.9 per cent in 2022-23, less than the 3.7 per cent fall forecast in March 2023

Real household disposable income (RHDI) per capita fell by 1.9 per cent in 2022-23, according to ONS outturn estimates from June 2023¹. That is 1.8 percentage points less than the 3.7 per cent fall the Office for Budget Responsibility (OBR) forecast in March 2023, though broadly in line with its March 2022 forecast of a 2.2 per cent fall¹. The OBR said the fall is still the largest single-year decline on ONS records, which begin in 1956-57¹.

The OBR set out the reasons for the gap between forecast and outturn in a box published in its October 2023 forecast evaluation report¹. Net benefits and taxes supported RHDI more than expected, subtracting 0.6 percentage points rather than the 1.6 percentage points forecast, a difference of 1.0 percentage point¹. Non-labour income growth added 1.6 percentage points more than forecast in March 2023, contributing 3.4 percentage points altogether, while labour income growth was broadly in line, contributing 0.1 percentage points more than expected, or 4.1 percentage points in total¹. Stronger than expected inflation dragged on RHDI growth by 0.9 percentage points more than forecast, taking 8.8 percentage points off growth¹.

Within non-labour income, higher interest rates gave a bigger boost than expected. Overall household investment income was £8.9 billion more than the March 2023 forecast expected, equal to 0.5 per cent of household disposable income, while overall interest payments were £0.6 billion higher¹. The OBR said that because the stock of household deposits is roughly equal to the stock of debt, the effects of higher rates broadly offset in aggregate, though timings can differ: in 2022-23 interest income dominated because rising deposit rates affected all households with interest-bearing savings, while the number of fixed mortgage contracts meant only a fraction of mortgage holders moved to higher rates that year¹.

The OBR also said the household saving ratio, excluding net pension adjustments, turned out 1.5 percentage points higher than expected, as consumption came in close to the March 2023 forecast while income was underestimated¹.

Why it matters for households

RHDI per capita is a measure of living standards: the income households have available to spend or save after taxes and benefits, adjusted for prices and population¹. The June 2023 estimate means the average fall in 2022-23 was smaller than the OBR had expected in March 2023, but it remains the largest single-year fall since ONS records began in 1956-57¹. The OBR had also forecast a further fall of 2.0 per cent in 2023-24¹.

The OBR said the difference from its March 2023 forecast was largely explained by net benefits and taxes, and by non-labour income, supporting incomes more than expected¹. It also noted that future data releases could lead to further revisions, given measurement challenges and uncertainties around 2022-23 incomes data, and that public sector finances data on receipts suggests higher outturns for taxes and contributions, so the ONS could revise 2022-23 figures in its September QNA release¹.

What happens next

The OBR flagged a possible revision to 2022-23 figures in the ONS September Quarterly National Accounts release, based on higher receipts outturns in public sector finances data¹. It said future data releases could lead to further revisions¹. The OBR's March 2022 forecast had RHDI per person returning sustainably to its pre-pandemic level only in 2024-25¹.