One million more households will be unable to afford the cost of essentials by April 2024

Over a third of households (10.6 million) will be unable to afford the cost of essentials like household bills or a trip to the dentist by April 2024, according to new analysis by the New Economics Foundation (NEF) in response to today’s autumn statement. The poorest 10% of families are set to see annual incomes fall £2,300 below rising costs of basics between April 2022 and April 2024. Meanwhile the richest 10% will see their incomes rise by £1,600 more than the increase in cost of essentials.

The analysis takes account of all income growth between April 2022 and April 2024, including higher earnings, benefit uprating, previous support for the cost of living crisis and the latest measures announced by the chancellor today. The rise in incomes is then compared to the effects of inflation on every family’s basic basket of goods and services needed for a decent quality of life.

The research uses the Minimum Income Standard (MIS), which is the UK’s leading approach to measuring living standards based on need and is used to calculate the​‘real’ Living Wage paid by companies like Ikea and KPMG, and football clubs like West Ham, Liverpool, and Everton.

Figure 1: The poorest households will fall a further £2,300 a year behind the cost of living

Figure 2: 37% of households will be unable to afford a decent standard of living in 2023 and 2024

Sam Tims, economist at the New Economics Foundation said:

​“We needed a plan to support people through the cost of living crisis and kick-start the economy. Instead, people’s incomes are going to be hit even harder and we’re facing the longest and deepest recession among rich economies.”

​“Today’s announcement to increase social security payments by inflation keeps things as they are: with the benefits system plagued by the ongoing impact of austerity. Support is still far below what families need, forcing people to go without heating and rely on foodbanks, particularly those impacted by the benefit cap, which should have been scrapped, not increased.”

​“Social security needs a fresh start. To support every family through this income crisis and the looming recession, the current system should be replaced by the living income which would set an income floor that’s enough to meet life’s essentials.“

Notes

The New Economics Foundation is a charitable think tank. We are wholly independent of political parties and committed to being transparent about how we are funded.

NEF analysis of the Family Resources Survey (FRS) using the IPPR tax-benefit model, April 2023 and 2024 MIS estimates uses OBR inflation forecasts accounting for the energy price guarantee. The bottom 5% of households are removed due to unreliable data in the FRS. Grossing is applied at the household level. Changes to capital gains thresholds not included in analysis.