Boris Johnson set to deliver worst living standard growth on record, report finds

Government’s forecaster predicts disposable income growth of just 0.1% over the course of this parliament - and latest data suggests incomes have gone into reverse

Boris Johnson (PA)

Boris Johnson's government is on track to deliver the worst growth in living standards over the course of any parliamentary term on record, and incomes are at risk of falling, according to analysis of official figures.

Real household disposable incomes are forecast to grow just 0.5 per cent between late 2019 when Mr Johnson won a decisive election victory, and 2024, a report from the Resolution Foundation think tank noted.

The annual growth rate of 0.1 per cent forecasted by the Office for Budget Responsibility would make this parliament the worst ever for income growth, behind the 0.3 per cent annual rise delivered by David Cameron and Theresa May between 2015 and 2017.

Incomes could even deteriorate over the current parliament, the latest data indicates. Official figures released shortly after the OBR calculated its forecast show that real disposable income growth has been weaker than expected this year.

While the OBR estimated that real disposable income would grow 1 per cent in the second quarter of this year, the Office for National Statistics found that it in fact fell 1.5 per cent.

A period of multiple crises since 2007 with no sustained periods of growth has resulted in “historically weak” wage rises, the Resolution Foundation said.

If incomes had risen in line with pre-financial crisis trends, households would have had an additional £7,000 of disposable income this year – or one-third more than they actually have.

Over the past 15 years, the average household’s disposable income, adjusted for inflation, has grown by just 9 per cent, compared to a pre-financial crisis normal of almost 50 per cent growth over a 15-year period.

“Last week the Chancellor hailed his Budget as marking a ‘new age of optimism’,” said Adam Corlett, principal economist at the Resolution Foundation. “But the economic reality facing families across Britain is far more sobering.”

He added: “Of course, Britain can – and must – turn this outlook around. But doing that requires a proper economic strategy for Britain in the 2020s that has the goal of higher living standards running through its veins.”

Chancellor Rishi Sunak defended the government’s failure to improve UK living standards during a grilling this week from MPs on the Treasury Committee.

Labour’s Angela Eagle pointed out that workers had experienced more than a decade of wage stagnation, with the OBR predicting several more years of low earnings growth.

Between 1992 and 2008, real wages went up by 36 per cent but in the years from 2008 to 2024, the OBR expects a rise of just 2.4 per cent, Ms Eagle said.

The chancellor argued the UK was “not alone” in experiencing lacklustre wage growth. He pointed to reasons for optimism such as increases in the minimum wage and government investment in research, development and skills.

However, he conceded that it had been “a struggle to get to some of the growth rates we saw previously”.