Squeezed families face waiting more than a lifetime for the doubling of living standards previously enjoyed every 40 years

Lower-income families have been beset by a double whammy of slower income growth and a rising struggle with their health and care needs, according to a new book published today (Tuesday) by the Resolution Foundation, which warns that failing to address their malaise risks causing further political disruption.

Unsung Britain – an 18-month investigation into the lives of the 13 million working-age families across the poorest half of the country – shows that they are working harder but seeing their incomes stagnate nonetheless.

In the four decades running up to the mid-2000s, the typical disposable incomes of working-age families in the poorest half of Britain doubled – after growing by 1.8 per cent a year in real terms. Since the mid-2000s however, annual income growth for this group has slowed to just 0.5 per cent (and incomes have fallen outright for the very poorest families).

After a terrible start to the 2020s, the immediate prospects for lower-income families are finally improving somewhat – with new analysis showing that their disposable incomes are on track to rise by an average of 0.9 per cent annually over the next four years.

Nonetheless, with incomes set to grow by just 0.5 per cent annually across the whole of the 2020s, it would take 137 years for lower-income families today to see the doubling of living standards previously enjoyed every 40 years.

The huge income slowdown since 2005 has been driven by pay rises drying up. The average gross annual earnings of someone in a lower income family has increased by £7,700 since the mid-1990s to £18,000 today – but nearly three-quarters of that increase took place before 2005.

The slowdown would have been even starker were it not for a rapidly rising minimum wage and increasing employment among lower-income families, who account for all of the overall rise in the UK employment rate since the mid-1990s.

In-work poverty has replaced worklessness as a core concern, with most of those living below the poverty line today having someone in work (55 per cent, up from 38 per cent in the mid-90s).

Taxes at least absorb a far smaller share of poorer households’ budgets compared to better off families (12 and 31 per cent for the poorest and richest households respectively), thanks to the progressive nature of the UK tax system.

But there is one big and unpopular exception to this – Council Tax. The very poorest households now spend four times as much as a share of their income on this tax compared to the very richest households. This unfairness makes the paucity of local services for lower-income families even more striking, says the Foundation.

Some costs have become particularly acute for families. An 11 percentage point swing from owning with a mortgage to renting privately over the three decades since 1995 means that 8.6 million people in lower-income families live in homes rented from a private landlord (far more than the 6.9 million in mortgaged households) and spend on average 43 per cent of their total household budget on rent.

The wider backdrop to the changing lives of Unsung Britain is an ageing population, with rising rates of ill-health and disability.  Almost one-in-three working-age adults in lower-income families have a disability, compared to fewer than one-in-five better off adults. Strikingly, ageing only accounts for a tiny share (17 per cent) of rising disability in Unsung Britain.

And while ill-health and disability trends are firmly in policy makers’ sights, the knock-on impact on caring needs have been much less discussed, despite one million people in lower-income families now providing at least 35 hours a week of unpaid care to adult relatives or friends.

The book warns that the malaise faced by the families of Unsung Britain helps to explain their widespread discontent, and that turning their fortunes around will hold the key to politicians regaining their trust.

To do this, politicians need to put the living standards of lower-income families at the heart of government policy – from targeted discounts on energy bills and bus fares, reforming Council Tax to lighten the load on poorer households, extending statutory support for carers and creating new incentives and proper enforcement so that all employers support disabled workers.

Ruth Curtice, Chief Executive of the Resolution Foundation, said:

“The 13 million working-age families across the poorest half of the country are widely courted by politicians. But despite working harder they have seen their disposable incomes stagnate, as they grapple with shrinking pay rises, higher costs and a growing struggle with their health and care needs.

“The stalling of disposable incomes means that many families’ hopes of home ownership have evaporated and work is not a guaranteed a route out of poverty.

“If politicians want to regain the trust of the families of Unsung Britain, they need to get the economy growing again so that pay rises pick up, while also putting their specific needs at the heart of efforts to turn the country around. If they fail to do so, the economic malaise facing Unsung Britain risks fuelling further political disruption.”