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

Successive policy packages have helped to cushion the impact of inflation for the poorest households but have left those on low to middle incomes exposed: the combined negative effects of high inflation and changes to taxes and benefits account for 0.5 per cent of the disposable income in 2022-23 for households in the bottom decile, whereas for deciles 2-5 the effects are between 7 per cent and 13 per cent (up to £4,000 a year). 7 million UK households (1 in 4) will face energy and food bills that exceed their disposable income in 2023-24, up from around 1 in 5 in 2022-23. Household disposable incomes have fallen sharply since the beginning of the pandemic, between 18 per cent for the lowest quintile and 9 per cent for the top quintile. Northern Ireland and the North East will see significant destitution by the end of 2024: 32 percent of households in Northern Ireland and 30 per cent of households in the North East where the climate is particularly challenging will face extreme poverty. Combining a Social Tariff and a Variable Price Cap present the most effective tools to tackle high energy bills: discounting energy bills for the poorest households and a revenue-neutral system where the price of energy rises with usage will lower the energy bills for the poorest (who use the least amount of energy) while incentivising efficient energy consumption for the more affluent. Regional disparities are widening: the regions that are falling further behind London and the metropolitan parts of the South East include the North East, the Midlands and Northern Ireland. By the end of 2024, output in London is projected to be 9 per cent above its pre-pandemic level, compared with a 1 per cent drop in the Midlands; while productivity per hour worked in London is forecast to rise from 64 to 68, in the West Midlands, it is projected to fall from 32 to 30. Levelling-Up can create meaningful change but requires reform: to deliver on the promises of Levelling Up, the fragmented funding streams need to be unified and applications by local authorities need to be radically simplified. A National Development Bank should be created to support investment projects across regions: persistently low public and business investment requires fundamental institutional reform; we continue to argue for the creation of a UK-wide National Development Bank endowed with around £50bn worth of finance to support investment projects across regions and sectors