Lifting living standards

One of the things I have always admired about Resolution Foundation is that it fulfils its mission with both a head and a heart. The head insists on rigorous analysis and knows that higher living standards for the majority require higher economic growth. The heart highlights the plight of those who are especially vulnerable to financial shocks and fights for them to have a stronger voice.

We have kicked off 2026 with overviews that speak from both our head and our heart.  Mountain Climbing reviews the progress made on policies to boost economic growth and suggests three areas (housing, trade and the labour market) where there is more to be done. Unsung Britain looks back over the last thirty years at the experiences of the 13 million working-age families in the poorer half of the income distribution. As Andy Burnham, Mayor of Greater Manchester, said at our conference, we need to “Refocus the British political debate on people who most need politics to work for them…the truth is the focus hasn’t been on them for far too long.’’

Having published those seminal reports, and having been in post for just over a year, it feels like the right time to take stock and look ahead to the rest of 2026 and beyond.

Our sole focus remains unlocking a better future for those 13 million families, for those on low pay or in precarious work, and for those vulnerable to financial shocks. Typical disposable incomes among lower-income working-age families have crawled at just 0.5 per cent annual growth for almost 20 years. If progress continues at this pace, it would take over 130 years for these incomes to double – compared to the buoyant final decade before 2005, when they looked on course to double in just 18 years.

Disposable income likely understates the challenges facing these families. They are working harder but seeing little income gain in return, tend to rely more heavily than better off families on public services whose performance has declined, and have faced a higher inflation rate than average through the cost of living crisis.

Turning this picture around requires us to address the root causes of the UK’s current malaise: poor growth, perilous public finances and persistent inequality. Over the coming year and beyond, we will focus our research on three overarching challenges that are fundamental to getting out of this funk.

1. Growth: How can policy support the economic growth needed for broad-based living standards improvements?

The Government has struggled to capture the public imagination with its focus on growth and seem to be at risk of changing tack. Yet weak growth is at the heart of living standards malaise. Output per hour worked is 10 per cent lower than in France and 18 per cent lower than in Germany. And although this has become a familiar tale, we mustn’t miss how dramatically bad the most recent act has been. UK GDP per person has barely grown since the pandemic, taking six years to deliver the growth we would have previously expected in around seven months. And when I say “previously”, I mean previously in those happy days of stagnation after the financial crisis.

Shifting the growth rate of a medium-sized economy is no small task, even if the diagnoses of what is holding it back are clear and extensive. We will focus on practical policy suggestions that could have a material impact. That will include further work on trade, housing supply, investment and employment.

With the establishment of Resolution Ventures, a social investment vehicle for technology that makes work better for workers, we have always sought to be at the forefront of interactions between technology and jobs. As we enter another period of potentially large technological disruption we will consider how our research can support policy makers to facilitate a transition that is positive for living standards.

2. The size and shape of the welfare state: How should the welfare state be reformed so that it is sustainable, valued and effective at supporting living standards?

The size of the state has expanded post-pandemic but dissatisfaction with public services is significant and rising – in 2024, 84 per cent of people surveyed said the public services were in a bad state.[1] When we spoke to low-and-middle income families, they rated fixing services above demands for higher incomes. The decline they observed in services from local government is in some ways a microcosm of challenges facing the UK more broadly. Local government spending power now is 12.3 per cent lower in real terms than in 2010-11, while demands on services, such as adult social care, have risen. Adult and children’s social care accounted for more than two-thirds (68.5 per cent) of council budgets in 2024-25. At the same time, when voters observe higher council tax paired with fewer bin collections, trust also suffers.

In a similar manner, the broader welfare state needs to find a better way to square budget constraints, rising demands, and better outcomes. Much of the recent rhetoric about social security is overblown, with spending on working-age benefits set to be broadly constant as a share of the economy.[2] As the long-standing tailwinds of declining defence spending and falling debt-interest costs come to an end, we can no longer rely on those fiscal dividends to ease pressure on public finances. In the face of rising and increasingly complex demands, we must now develop new, credible strategies to ensure the long-term sustainability of the welfare state.

We will begin with some of the most topical questions, because they also speak to some of the most important trends: disability benefits and young people not in education, employment or training. More broadly, as the political debate focuses on whether to make the state somewhat smaller or bigger, we want to focus on how our large welfare state could be more effective.

3. The falling and forgotten: Which groups have faced or are going to face the biggest living standards risks, and what targeted policies are needed to support them?

Weak living standards growth has had impacts across most of the population, but it has hit especially hard for some. The poorest working-age families have lower real incomes today than they did twenty years ago and 135,000 households are living in temporary accommodation.[3] Our economic progress has been limited, but that is no excuse for the most vulnerable taking a step backwards.

Understanding the diversity of experience in Britain is as important as understanding the general trends. The Resolution Foundation will continue its analysis into the impact on living standards of age, housing tenure and the cost of other essentials, among other things. We will also continue our work on those in precarious work and how both job quality and low pay can be improved. Regional inequality remains high and the low productivity of our second cities means that opportunities are not spread across the country. We are interested in partnering with local areas where we can support their work to drive higher living standards – recognising too that Westminster policy isn’t, and shouldn’t, be all that matters.

Our forthcoming research will look in particular at the experience of those in the private-rented sector, the outlook for child poverty, and the latest data on intergenerational equality.

Delivering with an excellent team, and through collaboration

These are ambitious priorities that will extend well beyond 2026, speaking not just to the current government but to the debate at the next election and beyond. Delivering this agenda requires an exceptional senior research team. I’m delighted that James Smith is becoming Chief Economist and Sophie Hale is stepping up to Research Director. I’ll continue to work closely with Mike Brewer, our Deputy Chief Executive, and Lindsay Judge,  Research Director. Greg Thwaites is stepping down as Research Director but will remain with us as a part-time Research Associate.

If you’re working on these questions or interested in collaboration, please do get in touch. The UK’s living standards challenge remains immense, but change is possible. Bold planning reforms that enable our major cities to hit housing targets, deeper alignment with the EU, and reaching an 80 per cent employment rate could together boost annual growth in GDP per head by 0.6 percentage points – delivering a £2,000 boost to household incomes and generating enough revenue to increase the NHS budget by a quarter. The power of policy to address the acute effects of the cost of living crisis will be evident this year, when we expect living standards of the poorer half of working age Britain to grow by 4.7 per cent, largely reflecting rising benefit income. Our ambition for 2026 and beyond is that our research and policy ideas can help make that a longer running trend.

[1] C Aref-Adib, E Fry & Z Leather, At your service? Why the 2025 Spending Review must reckon with the distribution of public service use, Resolution Foundation, April 2025, https://doi.org/10.63492/ZVYN2275; C Pheby & M Smith, General election 2024: 84% of Britons say public services are in poor shape, YouGov, June 2024.

[2] Working-age welfare spending is forecast to remain flat over the next five years, at a lower level than the early 2010s. See A Clegg, Is welfare spending ‘out of control’?, Resolution Foundation, November 2025.

[3] This is the number of households in temporary accommodation as of 30 September 2025 (the latest available data). Source: Ministry of Housing, Communities & Local Government, Statutory homelessness in England: July to September 2025, February 2026.