Britons are now poorer than they were before the pandemic, with the average person having £38 less to spend each month after tax than at the end of 2024, following three consecutive quarters of falling living standards.
Improving living standards across every part of the UK has been set out by the government as one of its most high-profile goals ahead of the next general election. However, new data suggests households remain under sustained financial pressure.
Updated figures published on Monday by the Office for National Statistics show that disposable income, adjusted for inflation, is now £1 lower per month than it was in the summer of 2019 and more than £20 lower than in December 2019.
Disposable income refers to the money people have left after paying taxes and receiving benefits, including pensions, and must cover essential costs such as rent or mortgage payments, council tax, food and energy bills.
The period between December 2019 and July 2024 marked the first parliament in recorded British history to oversee a fall in real disposable income.
Before 2022, there had been only one five-year stretch in which living standards declined, between 2008 and 2013, following the global financial crisis and subsequent austerity measures.
Since the 1950s, disposable income has fallen for three consecutive quarters on only five other occasions. Three of those occurred during the 2010s, with the remaining periods in the early 1960s and the late 1970s. The longest sustained decline lasted five quarters between December 2015 and March 2017, coinciding with the UK’s vote to leave the EU.
Simon Pittaway, senior economist at the living standards think tank the Resolution Foundation, said the latest data confirmed that any short-lived recovery in 2024 had ended.
He said: “Today’s ONS data confirms that Britain’s mini living standards bounce in 2024 is well and truly over. Growth has been poor this year and prospects for 2026 aren’t looking great either.”
He added that the country has faced “three once-in-a-generation economic shocks in less than two decades,” referring to the 2008 financial crash, Brexit and the cost-of-living crisis linked to the pandemic. Pittaway said many people in their mid to late 30s have spent their entire working lives moving from one national crisis to another, adding: “We need to avoid further shocks so that we can focus instead on boosting economic growth and lifting living standards.”
Sky News has been tracking the government’s performance against key economic targets, including living standards, inflation, and growth.
Despite three consecutive quarters of decline, overall living standards are higher than when Labour took office, following strong growth in the first six months of the new government that continued momentum from the final months of its predecessor.
Inflation has risen, however, and the UK is now the fourth-fastest growing economy in the G7, behind the United States, Japan and Canada.
Responding to the figures, a spokesperson for the prime minister said living standards fell during the previous parliament but insisted action is being taken to reverse the trend.
The spokesperson said real wages have risen more in the past year than in the first decade of the previous government, pointing to budget measures including support with energy bills, prescription charges, fuel duty and rail fares. They said inflation fell to 3.2% in November and is expected to ease further next year.
The spokesperson also highlighted lower interest rates since the election, increases to the national living wage that will give full-time low earners £900 more a year, and a £1,500 annual boost for those on the national minimum wage. They added that economic growth has been stronger than expected this year, with most forecasts upgraded.
However, concerns remain about the outlook for households. Following the November budget, the anti-poverty think tank the Joseph Rowntree Foundation projected that living standards would fall by £850 a year over the course of this parliament.
The organisation said some budget measures, such as lifting the two-child benefit cap, would make the decline “less painful” for low-income families.
Frozen tax thresholds are also expected to push many people, including low earners, into paying thousands of pounds more in real terms by the end of the parliament.
Sky News is also monitoring Labour’s progress on other key pledges, including reducing small boat crossings in the Channel, boosting housebuilding and expanding renewable energy.
