London Daily

Focus on the big picture.
Wednesday, Oct 08, 2025

People face biggest drop in living standards in 66 years

People face biggest drop in living standards in 66 years

The UK is facing its biggest drop in living standards on record as wages fail to keep pace with rising prices.

Soaring energy prices could push inflation to a 40-year high of 8.7% in the final three months of 2022, the government forecaster said.

Rising prices and tax hikes mean living standards will not recover to their pre-pandemic level until 2024-25, the Office for Budget Responsibility said.

The chancellor said government would "stand by" people hit by higher prices.

Living standards - disposable household incomes when adjusted for inflation - are expected to drop by 2.2% this year, the OBR said.

That would be their largest fall in a financial year since records began in 1956.

In the Spring Statement, Rishi Sunak said a 5p a litre fuel duty cut would take effect at 18:00 GMT, and he raised the threshold at which workers start paying National Insurance from £9,600 to £12,570.

But the OBR, which publishes its economic forecasts twice a year, said Russia's invasion of Ukraine had "major repercussions for the global economy, whose recovery from the worst of the pandemic was already being buffeted by Omicron, supply bottlenecks, and rising inflation".

The jump in oil and gas prices brought about by the conflict would "weigh heavily on a UK economy that has only just recovered its pre-pandemic level", it added.

Petrol prices had already risen by 20% since the OBR's previous forecast, and household energy bills are set to increase by 54% in April.

If wholesale energy prices remained as high as expected, then energy bills would rise by another 40% in October to take the bill for a typical household to £2,801 a year.

The energy regulator Ofgem has already said bills will increase 54% to £1,971 for a typical household from April.

With prices rising at such a rapid rate, wages would not keep up and and people would spend less, according to the OBR.

As a result, it has dramatically slashed its growth forecast.

In October prior to Russia's invasion of Ukraine it expected the UK economy to grow 6% this year. Now it expects growth of just 3.8% this year.


The chancellor promised to "stand by" families - but some of those families may feel more like he's put his arms around them - only to pick their pockets.

Much of their increased burden isn't the government's fault, reflecting global energy and food costs and supply issues. Come April the average household has to find nearly £1000 extra per year - just to afford the same stuff they did a year ago.

And that's without counting the National Insurance increases, which are still going ahead.

In total, the extra government help announced since October, according to the Office for Budget Responsibility will only compensate for a third of the prospective blow to living standards in the next 12 months.

And it's not just household's fortunes that are at stake but the entire recovery - upon which the chancellor has pinned his hopes of rebuilding the public purse.

The following year will also see slower growth than the OBR predicted five months ago. In 2023, the UK is expected to grow 1.8%, down from 2.1%.

However, from 2024 growth is expected to accelerate faster than expected, rising 2.1% that year and 1.8% in 2025, up from 1.6% and 1.3% respectively.

GDP or Gross Domestic Product is one of the most important ways of showing how well, or badly, an economy is doing.

It's a measure - or an attempt to measure - all the activity of companies, governments and individuals in an economy.

Stevie and Pauline


Stevie Hall in Halifax says rising food, fuel and energy bills have nudged her into debt already.

She told the BBC she had been batch cooking to save money and is only driving when there is a real need.

"We're just trying to get by, I'm trying to stay upbeat about it," she said.


GDP allows businesses to judge when to expand and hire more people, and for government to work out how much to tax and spend.

The OBR said the cut in living standards would have been worse without government support for households, including today's temporary 5p cut in fuel duty; the increase in the National Insurance contributions threshold; and a £9bn energy bill rebate scheme announced in February.

"Taking account of both energy and non-energy pressures on household incomes, the policy measures announced since October offset a third of the overall fall in living standards that would otherwise have occurred in the coming 12 months," it said in its report.

But Institute for Fiscal Studies director Paul Johnson said: "Perhaps what really stands out today is what was missing.

"In the face of what the OBR calls the biggest hit to household finances since comparable records began in 1956-57, [Mr Sunak] has done nothing more for those dependent on benefits, the very poorest, besides a small amount of extra cash for local authorities to dispense at their discretion.

"Their benefits will rise by just 3.1% for the coming financial year. Their cost of living could well rise by 10%."

Newsletter

Related Articles

0:00
0:00
Close
France: Less Than a Month After His Appointment, the New French Prime Minister Resigns
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Sarah Mullally Becomes First Woman Appointed Archbishop of Canterbury
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
US Prosecutors Gained Legal Approval to Hack Telegram Servers
Macron Faces Intensifying Pressure to Resign or Trigger New Elections Amid France’s Political Turmoil
Standard Chartered Names Roberto Hoornweg as Sole Head of Corporate & Investment Banking
UK Asylum Housing Firm Faces Backlash Over £187 Million Profits and Poor Living Conditions
UK Police Crack Major Gang in Smuggling of up to 40,000 Stolen Phones to China
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Trump Proposes Farm Bailout from Tariff Revenues Amid Backlash from Other Industries
FIFA Accuses Malaysia of Forging Citizenship Documents, Suspends Seven Footballers
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
A Dollar Coin Featuring Trump’s Portrait Expected to Be Issued Next Year
Australia Orders X to Block Murder Videos, Citing Online Safety and Public Exposure
Three Scientists Awarded Nobel Prize in Medicine for Discovery of Immune Self-Tolerance Mechanism
OpenAI and AMD Forge Landmark AI-Chip Alliance with Equity Option
Munich Airport Reopens After Second Drone Shutdown
France Names New Government Amid Political Crisis
Trump Stands Firm in Shutdown Showdown and Declares War on Drug Cartels — Turning Crisis into Opportunity
Surge of U.S. Billionaires Transforms London’s Peninsula Apartments into Ultra-Luxury Stronghold
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Jeff Bezos Calls AI Surge a ‘Good’ Bubble, Urges Focus on Lasting Innovation
Japan’s Ruling Party Chooses Sanae Takaichi, Clearing Path to First Female Prime Minister
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Taylor Swift’s ‘Showgirl’ Launch Extends Billion-Dollar Empire
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
×