Resolution Foundation analysis finds five years of inflation have left typical working-age households £2,900 worse off

The Resolution Foundation published analysis on 8 October 2026 finding that the real incomes of typical working-age households have fallen rather than grown over the past five years, leaving them £2,900 (7.9 per cent) worse off this year than in a world of normal inflation¹. The report, Counting the cost, was funded by the Nuffield Foundation¹.

The Foundation says the past five years delivered 13 years' worth of "normal" inflation in five, with inflation peaking at 11.1 per cent and prices nearly 30 per cent higher in August 2026 than in July 2021¹. Energy was at the centre of the shock: by autumn 2022 household energy bills had more than doubled since the start of the crisis, food inflation peaked at nearly 20 per cent in March 2023, and services inflation reached 7.4 per cent in July 2023, its highest in more than three decades¹. Energy bills and food together account for a quarter of the change in the price level over the period¹.

The report says the real incomes of a typical working-age household in 2026-27 are £2,900 a year lower than they would have been had inflation stayed at 2 per cent over the past five years¹. Between 2020-21 and 2026-27, real median income after housing costs for non-pensioners looks set to fall by 1.3 per cent (£450); incomes at the 25th percentile by 1.2 per cent (£270); while households at the 75th percentile see marginal growth of 0.3 per cent (£130)¹.

The Foundation says the rise in non-housing costs since before the pandemic has been around one-sixth bigger for the poorest tenth of households than for the richest tenth, because essentials take a larger share of poorer households' spending¹. An extra 1.7 million households said they were unable to keep warm enough in 2022-23 compared with 2021-22, 950,000 of them in the poorest 40 per cent of the population, and the poorest tenth of neighbourhoods cut energy use by 15 per cent more than the richest in response to price rises in 2023¹. By March 2026, 18 per cent of households in the poorest half of the country were behind on a priority bill, up from 10 per cent in September 2020¹. The total owed to energy suppliers has more than tripled in real terms since 2018, to £5 billion, while Council Tax arrears in England have risen 117 per cent since 2012-13, to £7.5 billion in 2026-26¹.

The Foundation says the Energy Price Guarantee alone cost over £20 billion and was paid regardless of need¹. GB News reports household energy debt climbing to almost £7 billion, and separately reports British Retail Consortium figures showing retailers' electricity bills rising 16 per cent, from £2.72 billion in 2025 to £3.16 billion in 2026². The Foundation's £5 billion figure for energy supplier debt and GB News's "almost £7 billion" are not the same measure and the two are not reconciled in either report¹.

Why it matters for households

The figures describe incomes already received and bills already paid. The £2,900 is a comparison with a hypothetical path in which inflation had held at 2 per cent, not a sum anyone receives or loses in a single payment¹. The arrears figures cover priority bills including energy, water, Council Tax and rent, and the 18 per cent rate applies to households in the poorest half of the country as of March 2026¹. The Foundation says the hit to incomes was felt across the distribution but that poorer families cut heating hardest and fell behind on bills fastest¹. Its household costs index work sets out how inflation differs by household type, and its inflation guide explains how the rate is measured.

What happens next

The Chancellor, John Healey, will deliver Labour's financial statement at the end of October, according to the Manchester Evening News, which reports pressure to provide additional cost of living support after Andy Burnham pledged "breathing space" for families³. The Foundation's authors argue any new support should be targeted at poorer families, with energy bills the priority¹. Green MP Hannah Spencer said predicted increases in January would be "the final straw for too many people" and called for costs to be moved off energy bills, a funded national home insulation scheme, action on energy company profiteering and faster scaling up of cheaper, cleaner energy³. The Energy Price Guarantee ran in 2022 to 2023.