Britain has slipped into a ‘personal recession’ as living standards fall again and ministers admit they have no growth plan

GDP per capita has fallen again - that means living standards are shrinking. For all the spin about headline growth figures, the reality for families is stark: the economy may be ticking along on paper, but people are getting poorer.

The government got a lucky escape in 2024. Revisions showed minuscule improvements in living standards, just enough for ministers to claim the worst had been avoided. But instead of treating that moment as a warning, they treated it as vindication. There was no change of course. No urgency. No serious attempt to deliver the growth that working households desperately need.

As the Health Secretary, Wes Streeting, himself admitted, the government has “no growth strategy at all.” That is an astonishing confession. At a time when productivity is stagnant and businesses are buckling under high taxes and mounting regulation, ministers have no credible plan to grow the economy and raise living standards. Instead, they have defaulted to the same tired formula: higher spending, more intervention and a hope that growth will somehow materialise.

It will not.

A renewed decline in living standards should never have been on the cards. After coming so close to the line last year, ministers knew how fragile the economy was. Yet there was no meaningful shift in direction, no urgency to boost growth or ease the pressure on households. That complacency has carried a cost. With output per person now falling again for the second consecutive quarter, what was once a warning has become reality for millions.

When households face a recession, they tighten their belts. The government should do the same.

That means restraining benefit increases during this personal recession, ensuring support is sustainable and focused on the most vulnerable rather than ratcheted up automatically. It means triggering an immediate departmental spending review so Whitehall is not spending as usual while taxpayers face financial strain. It means a public sector pay freeze until living standards recover in the private sector. It means reforming visa categories to prioritise high-skilled migration that boosts productivity rather than adding pressure to public services and wages.

It also means accountability at the top. MPs’ pay should be explicitly linked to GDP per capita, so lawmakers feel the consequences of falling living standards directly.

Regardless of what happens in Number 10 with personnel, there needs to be a radical overhaul of economic policy to ensure that this downturn is short, shallow and not allowed to become a recurring feature of British life.

Britain does not need ever-higher taxes or an ever-expanding state. It needs a serious plan for growth, firm control of spending and political leaders prepared to operate under the same financial realities as the people they represent. Without that shift, falling living standards will become a recurring pattern rather than a rare alarm bell, and voters will remember who chose not to act.

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Darwin Friend is the Research Director at the TaxPayers' Alliance

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