We need political will to prevent another lost decade of living standards but there is no quick fix
6 March 2024, 06:00 | Updated: 6 March 2024, 12:53
- Alfie is the Chief Economist & an Associate Director at the Joseph Rowntree Foundation
The UK is on course for a second lost decade in living standards.
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Average earnings for working families today are £1,900 lower in real-terms compared to the start of 2021. This isn't likely to change.
If economic forecasts remain unchanged, families will still be £1,300 worse off by the end of the decade.
Meanwhile, prices will continue to rise. The price of a basket of essential goods – such as food, energy and basic toiletries – costs £270 a year more than in 2021 in real terms (over and above increases in inflation generally).
Real rents and mortgages are £700 higher. Both will be less affordable relative to earnings until at least 2028.
At the same time, our public services are straining because of a lack of investment. Longer NHS waiting times, crumbling school buildings and workforce strikes have followed.
Workers are sicker and more demoralised, which hurts our economy and our society.
This is the economic backdrop in an election year. But politicians of all persuasions are out of touch with the reality of the crisis unfolding.
They are more preoccupied with election giveaways and short-term gimmicks than lasting solutions.
But we can be optimistic. These challenges are political in nature, not insurmountable economic problems. With the right political will, they could start to turn.
An immediate priority is reforming Universal Credit so that people always have enough to afford basic essentials.
This would mean a single adult would receive at least £35 more per week as part of the standard payment. The need for a new guarantee that enshrines this in law is urgent.
But an agenda for greater economic security goes beyond this.
We also need to invest in the provision of both formal and informal care, rebalance new housing supply towards affordability, build new strategies for employment support that also focus on the quality of work itself, and improve energy efficiency and affordability for families.
There is no quick fix.
You cannot rebuild in a week what has been neglected for a decade.
But we can start by recognising that a strong economy rests on the resource, security and dynamism of the society it serves.
Business investment may be the lifeblood of a growing economy, but, social security and public services provide the heartbeat.
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