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Outlook for UK Households, the Devolved Nations and the English Regions

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  • Bhattacharjee, Arnab
  • Pabst, Adrian
  • Robyn Smith
  • Szendrei, Tibor

Abstract

While aggregate real personal disposable income will grow this year, the distributional picture is different when accounting for housing costs and household composition: we find that living standards, as defined by equivalised household real disposable income (eHRDI), are still significantly lower compared with 2019 as the costs of rents and mortgages have wiped out the gains from real wage growth. The fall in living standards has hit the bottom half of the income distribution hardest: for households in the bottom-income decile, living standards as measured by eHRDI are lower by around 20 per cent compared with 2019-20 levels; for income deciles 2-4, the fall in living standards is on average around 8 per cent. Living standards will improve on average by 6 per cent in 2024-25 relative to 2023-24, but there are distributional differences: households in the bottom decile experience a 2 per cent fall, and those in the second decile a 5 per cent rise, while households in deciles 4-9 will see a 7-8 per cent rise. Targeted policy has helped the hardest hit households the most, while tax cuts have been regressive: the Cost-of-Living payments provided much-needed assistance to low-income households, while the 4p NIC cut benefitted high-income households disproportionately; the benefit for households in income deciles 2-4 was cancelled out by the freezing of the personal allowance and the income tax bands. Since 2022, the average household has received £2,000 in the form of state support: the bottom decile has received more state support (£2,100) than the average, but the top two deciles have also received more state support (£2,520 and £3,940 respectively). Employment is flatlining across all regions and continued revisions to regional employment data reflect uncertainty in the labour market: together with higher projected inactivity rates as the population ages, these highlight a strained labour market which could hinder future growth potential. Productivity differentials within and across the regions remain high and are a considerable drag on UK growth: this needs to be tackled structurally and is the central task for regional regeneration.

Suggested Citation

  • Bhattacharjee, Arnab & Pabst, Adrian & Robyn Smith & Szendrei, Tibor, 2024. "Outlook for UK Households, the Devolved Nations and the English Regions," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 14, pages 48-75.
  • Handle: RePEc:nsr:niesra:i:14:y:2024:p:48-75
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    References listed on IDEAS

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    1. Joseph Vavra & Erik Hurst & Andreas Fuster & Martin Beraja, 2017. "Regional Heterogeneity and Monetary Policy," 2017 Meeting Papers 270, Society for Economic Dynamics.
    2. Anna Stansbury & Dan Turner & Ed Balls, 2023. "Tackling the UK’s regional economic inequality: binding constraints and avenues for policy intervention," Contemporary Social Science, Taylor & Francis Journals, vol. 18(3-4), pages 318-356, August.
    3. Philip McCann, 2020. "Perceptions of regional inequality and the geography of discontent: insights from the UK," Regional Studies, Taylor & Francis Journals, vol. 54(2), pages 256-267, February.
    4. Arnab Bhattacharjee & Adrian Pabst & Tibor Szendrei & Geoffrey J. D. Hewings, 2024. "NiReMS: A regional model at household level combining spatial econometrics with dynamic microsimulation," Spatial Economic Analysis, Taylor & Francis Journals, vol. 19(3), pages 436-461, July.
    5. Bhattacharjee, Arnab & Szendrei, Tibor, 2021. "Box E: Distributional impacts of Covid-19 and potential for policy intervention," National Institute UK Economic Outlook, National Institute of Economic and Social Research, vol. 0(4), pages 41-44.
    6. Bhattacharjee, Arnab & Szendrei, Tibor, 2021. "Box E: Distributional impacts of Covid-19 and potential for policy intervention," National Institute UK Economic Outlook, National Institute of Economic and Social Research, issue 4, pages 41-44.
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    Cited by:

    1. Max. A. Mosley & Edmund Cornforth, 2023. "The Macroeconomic Effect of the UK’s 2022 Cost-of-Living Payments," Discussion Papers 2316, Centre for Macroeconomics (CFM).

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