Disposable income fell last parliament for the first time on record – spending review must pass ‘living standards test’
06 June 2025• New analysis shows the 2019-2024 parliament saw living standards decline for the first time since records began, falling by 0.1 per cent in real terms.
• Regional disposable income inequality rose twice as fast in parts of central London compared to places like east Lancashire, northern Greater Manchester and Swindon since 2011.
• Upcoming spending review must pass the ‘living standards test’ by ensuring key departments can raise incomes by the end of this parliament, report argues.
New analysis from the Fabian Society, released today, shows living standards declined under the 2019-2024 government for the first time on record.
The report, Better off: Delivering living standards improvements in one parliament, funded by abrdn Financial Fairness Trust outlines the extent of the living standards crisis under the last government and since the 2008 crash. It also makes practical recommendations for how this government can ensure this trend is reversed.
Since the 2008 crash, the rate of Real Household Disposable Income (RHDI) growth has halved. In the 17 years preceding the crash, RHDI rose by £6,700. In the 17 years since then, it rose by only £2,900.
However, if disposable income had grown by 2.4 per cent a year, as it did in the 1997-2007 period, people would be 32 per cent better off than they are now. Disposable household income per person would be higher by £7,700 per year, or £149 per week.
Despite the last government’s promise to ‘level up’, regional income inequality rose to the highest of any major economy. Since 2011, disposable income has risen more than twice as fast in parts of central London compared to places like east Lancashire, northern Greater Manchester and Swindon, and some places have disposable income equivalent to that of Slovenia.
The report calls for the government to prioritise and coordinate action on living standards across key departments. The spending review must pass the ‘living standards test’ by demonstrating how these departments can raise household incomes by the time of the next election.
But this is made harder because responsibility is split between many different departments with competing priorities. The Treasury should take the lead, convening a core group of government departments in a determined push to raise living standards, with a dedicated living standards taskforce to make sure this priority is coordinated effectively, the report argues.
The Treasury should be made accountable for five living standards goals: household incomes; living costs; destitution and poverty; economic security; and reducing economic inequalities. And the government must make raising living standards a stated priority across this core group of departments, says the report.
The report argues that the government should prioritise a range of measures, from social security uptake to social tariffs and job security – all coordinated by the living standards taskforce.
Luke Raikes, Fabian Society Deputy General Secretary and author of the report said:
“At the next election, the public will ask a simple question – “Am I better off?” The government must act now if they want people to answer yes to that question, and this spending review is a major opportunity.
“The last government oversaw an unprecedented failure to raise living standards. This is because low productivity growth held back wages, while social security cuts and living costs hammered household budgets.
“The government has rightly made living standards one of its milestones, and departments have been working together around its missions ahead of the spending review. But the risk is that living standards now slips between those departments, when it needs to be the government’s central priority – not just in all future budgets, but in the day-to-day work of government.”
Karen Barker, Head of Policy and Research at the abrdn Financial Fairness Trust said:
“Stagnating incomes are holding back the living standards of too many people in the UK and some regions are particularly badly affected.
“As this report shows, both raising incomes and controlling essential living costs, from housing to childcare to utilities, will be needed to help people on low-to-middle incomes feel better off by the end of this parliament.”