Living Standards Outlook 2024 projects weak income growth and rising poverty without policy change

The Resolution Foundation published its sixth annual Living Standards Outlook on 29 August 2024, assessing incomes, poverty and inequality as they stand in 2024-25 and projecting them to 2029-30 using economic forecasts and policy assumptions inherited by the new Government¹.

The report projects income growth of 3 per cent in 2024-25, which it attributes in part to pre-election tax cuts, followed by weak income growth for the rest of the Parliament on current forecasts and assumptions. It says this is driven by sluggish projections for earnings growth, tax rises, rising housing costs and falling savings interest¹.

Incomes at the bottom of the distribution are projected to fall in each year of the Parliament as things stand. Households at the 10th and 20th income percentiles are set to be poorer in 2029-30 than in 2023-24, which the report says would mean essentially no net growth in 10th percentile incomes across the 25 years from 2004-05 to 2029-30¹.

On poverty, the report projects that the number of children in relative poverty will rise by 1.5 million to reach 4.6 million by the end of the decade, and that absolute poverty will stagnate at 18 per cent of the total population¹.

The report also models three scenarios: an optimistic outcome for earnings growth and two illustrative social security policy packages. It says faster earnings growth alone would boost household incomes and slightly reduce absolute poverty, but would only speed up the projected rise in relative poverty and inequality¹.

The two benefit packages modelled are, first, ending the two-child limit, the benefit cap and the freeze to the Local Housing Allowance, and second, linking annual working-age benefit uprating to growth in earnings rather than prices. The report says the first would lift 1 million people, including 600,000 children, out of relative poverty immediately, while the second would stabilise the relative poverty rate rather than allowing it to rise again through the rest of the Parliament¹.

Why it matters for households

The projections cover the whole of the current Parliament, so the households affected are those on lower incomes in particular. The report says households at the 10th and 20th income percentiles are set to be poorer in 2029-30 than they were in 2023-24, and that incomes at the bottom of the distribution are projected to fall in each year of the Parliament as things stand¹. For families with children, the projected rise in relative child poverty is 1.5 million, taking the total to 4.6 million by the end of the decade¹.

The 3 per cent income growth projected for 2024-25 is a single-year figure, attributed partly to pre-election tax cuts, and the report does not project the same pace for later years¹. The report's scenarios indicate that the poverty projections change under different policy assumptions: ending the two-child limit, the benefit cap and the Local Housing Allowance freeze is modelled as lifting 1 million people, including 600,000 children, out of relative poverty immediately, and uprating working-age benefits in line with earnings rather than prices is modelled as stabilising the relative poverty rate¹. These are modelled scenarios, not announced policy.

The report does not set out a timetable for any policy decisions, and no next steps by government are reported in it. The regulation and policy context for these projections is that they rest on economic forecasts and policy assumptions inherited by the new Government, which the report states it used as its basis¹.