Better off Britain

Are you better off than you were four years ago? Since Ronald Reagan fought – and won – the 1980 presidential election on this simple question, politicians have focused relentlessly on living standards.

There are good reasons for this. Living standards really matter for people. Improvements in living standards give people more security, enabling them to live their lives free of the anxiety of having to struggle from paycheck to paycheck. This security brings people a sense of hope – for their future, for their children’s future, and for the country as a whole.   

Household finances matter for electoral fortunes too. Governments that deliver broad-based improvements in people’s living standards tend to be rewarded by the electorate. Those that oversee squeezes in living standards get punished.

The last government was a case in point. The Conservatives oversaw the worst parliament on record for living standards. They also suffered one of the largest swings in UK general election history, with their dismal record on living standards being the central reason for their defeat.

There is some evidence to suggest that living standards are recovering. Wages are increasing faster than inflation and, at the recent spring statement, the chancellor highlighted the OBR’s forecast that families will be on average over £500 a year better off by the end of the parliament.

While averages matter, so too does distribution. The chancellor was proud to highlight the OBR’s forecast for living standards growth. However, Resolution Foundation’s analysis suggests that in the next five years, the average income across the poorest half of working age households will decline by three per cent, or £500. This is driven largely by the significant reductions in welfare spending announced recently.

Clearly, the cost-of-living challenge has not gone away. Today, millions of households across the UK will see a triple whammy of bill increases. Water bills are going up, as the water companies seek to repair crumbling infrastructure which has suffered from decades of under-investment. Energy bills will increase again, highlighting both our continued vulnerability to fluctuations in international energy markets, and the vital need to decarbonise our grid. Most households will see further increases in council tax, as town halls struggle with continued cost pressures.

The government is rightly concerned about delivering improvements in living standards. Their initial growth mission focused on delivering the highest sustained growth in GDP in the G7. While GDP growth matters, this will not inevitably be felt and appreciated by the average worker and the average voter. We know what happened to the leader who oversaw the fastest growth in the G7 last year; President Biden and the Democrats were unceremoniously turfed out of office by an electorate who felt that they were not benefitting from growth in a high-inflation environment.

The government has reframed their growth mission, prioritising improvements in real households’ disposable income in every region. This is exactly the right focus, ensuring that we deliver not just economic growth, but improvements in household finances that will be felt across the country.

This mission needs to be the central focus of the government. It needs to be hardwired into the structure of everything they do, with key departments working closely together; with policies tested for their impact on living standards; and with fiscal events focusing on driving improvements in living standards. With significant pressure on public finances, they need to be creative and explore the regulatory changes that can deliver improvements in living standards alongside spending measures. And they need to focus not just on averages, but on distribution too, with a concerted effort to ease the squeeze on low-income households.

At the Fabian Society, we will shortly be releasing a living standards action plan, setting out exactly how this can be delivered. From support for people to work more hours and upskill, to further raises to the wage floor. From better use of social tariffs to investment in social security.

If the government wants to secure a second term, and deliver a decade of national renewal, they must ensure that voters feel better off at the next election than they were at the last.  

Image credit: Yuichi Shiraishi via flickr