Resolution Foundation publishes cost-of-living report Counting the cost

The Resolution Foundation published a report, Counting the cost, on 8 October 2026 estimating that the real incomes of typical working-age households are £2,900 (7.9 per cent) a year lower in 2026-27 than they would have been had inflation stayed at 2 per cent over the past five years¹. The report, funded by the Nuffield Foundation, covers the period since prices began rising in 2021¹.

The report says the past five years delivered 13 years' worth of normal inflation, 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 Office for National Statistics put inflation at 3.1 per cent in August 2026².

The income figures vary by point on the distribution. 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 £2,900 figure is the estimated gap in annual household income in 2026-27, not a sum lost over five years or a payment; it equates to roughly £242 a month². It applies to the median non-pensioner household, not every household².

The report 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 tenth¹. An extra 1.7 million households said they could not keep warm enough in 2022-23 compared with 2021-22, 950,000 of them in the poorest 40 per cent of the population¹. Households cut gas and electricity use by 13 per cent across 2022 and 2023, yet were still spending 57 per cent more on gas and electricity at the height of the crisis, adjusted for inflation, than before the pandemic². Among poorer households renting, 22 per cent were behind with rent, about double the proportion in 2020².

Why it matters for households

The estimates describe how far incomes have fallen behind where earlier forecasts suggested they would be, rather than a cash loss or a payment². The squeeze is uneven: poorer households spend a larger share of income on essentials, and the report says the hit to non-housing costs was around one-sixth bigger for the poorest tenth than the richest tenth¹. Arrears have grown, with 18 per cent of households in the poorer half behind on a priority bill by March 2026, up from 10 per cent in September 2020¹. Energy remains a live cost: Ofgem's price cap rose 4 per cent from 1 October 2026, taking the typical annual figure to £1,723 for a household using a typical amount of gas and electricity and paying by Direct Debit in England, Scotland or Wales². The cap limits unit rates and standing charges rather than fixing every bill, and does not directly affect people on fixed tariffs². The report also warns inflation could rise above 4 per cent early in 2027 on further energy price pressure, a forecast rather than a confirmed increase².

What happens next

The report's authors say any new support should be targeted at poorer families, with energy bills the priority, and warn that the Energy Price Guarantee alone cost over £20 billion and was paid regardless of need¹. The report notes the Government is considering fresh cost of living support in the upcoming Budget¹. It introduces no new payments or benefit changes².