Can the UK achieve good living standards and inclusive growth?

17 February 2016

Those of us turning up to the Resolution Foundation offices in Whitehall looking for good news about reductions in poverty on Tuesday morning were left a little disappointed. The headline good news from Living Standards 2016 is that, finally, typical household incomes have returned to their pre-crisis peak. But beyond that things looks a little less rosy.

Perhaps the most sobering part of the report is the forecast that there will be an increase in inequality over the course of this Parliament, with the 25% poorest households being worse off at the end than at the beginning.

The analysis is extremely helpful and the report worth a look, with excellent charts and graphs presenting complex data in straightforward ways. Out of many, three issues stand out for me: regional and generational differences and the impact of housing costs.

The regional differences are no surprise, with all of the positive and negative impacts of greater economic growth in London and the South East. For me this reinforces the need to make sure that we get devolution right and make a success of the ‘Northern Powerhouse’ and ‘Midlands Engine’.

The inter-generational differences in changes in living standards are worth much more thought and debate. One graph shows starkly how median household incomes (inflation-adjusted) for working age households are the same now as in 2002 compared with a 20% rise for pensioner households.

Above all else, though, the impact of housing costs on low to medium income households is the most worrying. A typical household now needs 22 years to raise the deposit for a house compared with 3 years in the 1990s. This has enormous ramifications for our economy and for people’s lives, with large increases in numbers of people renting in the private sector and much lower home ownership.

As Polly Toynbee rightly pointed out, all of the analysis is about ‘typical households’, and it’s really when we look beyond the averages that we can begin to grasp what is happening and set out what needs to be done about it. At Learning and Work Institute we are concerned, for instance, about the living standards for people with disabilities who are much less likely to be in work than a typical household. Equally we want more focus on people in low pay, many of whom struggle to find routes to better jobs.

These and other issues require new approaches – the Resolution Foundation analysis shows that current policies will not lead to inclusive economic growth. If the government is to achieve its laudable ambitions of full employment, halving the disability employment gap and greater social mobility, then a more integrated approach to employment and skills is vital. I’m looking forward to helping to design, trial, deliver, evaluate and roll out those new approaches.