The Resolution Foundation says UK incomes will flatline until 2030. This isn't an accident—it's by design. High interest rates, unfair taxes, and Labour's inaction are all crushing incomes and deepening inequality. We need change.
This is the audio version:
This is the transcript:
What is screwing Britain? It's a question that needs to be asked because this week, the Resolution Foundation brought out a new report, which has suggested that typical UK incomes won't grow at all in the 2020s. In the entirety of this decade, what they are suggesting is that after-tax incomes enjoyed by people in this country are going to be, in real terms, that is, inflation-adjusted, stagnant.
And let's be clear about this: this is not a radical view. This is the view of the Resolution Foundation. And the Resolution Foundation is about as solid, hardcore, right-wing Labour as you can get. The last chief executive is now a Treasury minister. The new chief executive switched from the Treasury to the Resolution Foundation last November.
This, then, is mainstream thinking, and indeed throughout the report, the Resolution Foundation emphasises that the view that they're presenting, that the UK is utterly stagnant, is one that is shared now by the Office for Budget Responsibility, and this week we've also had a speech by Andrew Bailey, the Governor of the Bank of England, which is saying very much the same thing.
Britain is economically dead. We are being screwed by the system, and my suggestion is that this is not an accident. It's by design. There are a number of key things that are preventing development from happening in this country at present, and which are preventing real incomes from rising at present.
One is that too much tax is being paid by ordinary working people.
The corollary of that is quite simply that there is too little tax being paid by people who have high levels of wealth, high levels of investment income, and high levels of capital gains. Companies are also not paying their fair share to the UK tax pot. But ordinary people are paying too much, and the reason is very straightforward. There are two.
One is that council taxes are rising too fast and unfairly, and council tax is a deeply regressive tax, meaning that any increase is going to be suffered more by those on lower income than it is by those on higher income, so fueling inequality.
And the other is that we have what is called fiscal drag. The personal allowances that are made available to people by the tax system have essentially been frozen since Rishi Sunak was Chancellor of the Exchequer right at the beginning of this decade, and because Labour appears to have no plan to change that, the consequence is that more and more people are paying more and more tax out of their earnings and real household incomes after tax are stagnating.
But there are other factors which are absolutely critical as well. One is that rents are rising, and are becoming unaffordable, as are house prices. And house prices are becoming unaffordable because of another deliberate policy by the government, which is to keep interest rates far too high.
This week, we have seen people in the City of London - fund managers - calling on the Bank of England to stop selling the bonds that they bought during the COVID crisis, to try to force interest rates to the high level that they are; much higher than they are in almost any other developed country.
And one of the reasons why the UK is stagnating is that interest rates are simply too high, and are artificially so, and that is the consequence of decisions made by the Bank of England, backed up, of course, by the government, who isn't arguing with them.
So that is forcing house prices up for those who have mortgages, and rents are rising as a consequence because there's a very strong relationship between the cost of mortgages and the increase in the price of rents.
The result is that we are living in an economy where vast amounts of people's disposable income, that is, the money that they get after tax, is being used to pay what is, in effect, an extraction from the economy; an extraction to those who have wealth by way of the payment of interest, or those who have wealth by being the owners of property.
This is what is called a rentier economy, where rents are being extracted - not earned, but extracted - from those people who do actually work for a living.
And there's another problem as well, and that is, of course, that the government is refusing to spend enough to maintain public services and to put in place a proper social safety net in the UK.
Benefits are too low. The expenditure on health and education isn't keeping up with demand, and in particular, the growing healthcare crisis, which these other problems are creating in the UK economy, and none of our major political parties appear to have any answers to this.
Let me stress, there's also another problem. Whilst median income, that is the mid-range income in the UK, is going to be stagnant from 2019 to 2029, that's not true for everybody. Those who are at the highest level will see some real increase in their income over that period. So the best off are not going to be on stagnant incomes. They will see their incomes rise a bit.
But the worst off, that is, the poorest 10% of people living in the UK, that's 2.8 million households, are going to see their income fall by £1,500 a year in real terms over that decade.
So there's a real price to this stagnation, and that is that the poorest people in this country are getting poorer, and nothing is being done about helping them.
In particular, families with children are being really hard hit. They are really suffering as a consequence of the changes, and their incomes are undoubtedly falling. If any group in society is suffering badly, it is parents and their children. They are literally seeing poverty increase day by day.
And of course, one reason for that is that the Labour government is refusing to remove the two-child benefit cap, which would transform the situation for many of the poorest families in the UK.
At the same time, we have another group in society who's doing quite well, and that is pensioners. They are being protected by the triple lock, which has been put in place by governments for around 15 years now, which means that state pensions always rise by more than inflation, and as a consequence, their incomes are rising.
We could not come up with a situation which is more perverse, where the old are seeing increasing incomes, but the parents of their grandchildren are not. And again, Labour has no plan to change this.
And let me reiterate that point because it is so important. What we're seeing here is a form of market failure because, implicit in all of this, is the failure of neoliberalism to come up with any form of real growth, but it's also the consequence of deliberate political policy.
High interest rates, high taxes on working people and broken government services do not happen by chance. They happen by design, and all of these things have been decided upon by Rachel Reeves and the Treasury and imposed on government departments, so this is the net outcome. We are suffering poverty as a consequence of the choices made by Labour now.
And at the same time, Labour is choosing to do nothing about rentier economics. It's not building enough houses to ensure that rents can be stabilised. It is not bringing interest rates down, and instead, it is doing everything it can to increase private profits and subsidise those out of state spending, whilst people in real need are getting no benefit at all.
Labour's silence on all these issues is staggering.
What needs to be said is that neoliberalism has failed. The Resolution Foundation did not say that. As I said at the beginning, this is a centre-right think tank, as far as I'm concerned. They would call themselves centre-left, but the left has now moved so far to the right that the term centre-left is now meaningless.
The consequence of the failure of neoliberalism is that real wages are stuck, public services are being cut, and work no longer lifts people out of poverty.
The failure of neoliberalism has also meant that there is no reward to people now, even if they do get into work, because any reward that is generated goes to the wealthy and not to working people.
Meanwhile, infrastructure is collapsing, and hope is disappearing.
What do we need to do about this?
We need to end austerity.
We need to let the state invest in the infrastructure that we need to rebuild growth.
We need to see services as the foundation of national security, of national income, and even of national assets.
We need to talk about social security, not welfare and benefits.
We need to see that the social safety net is something that is part of the provision of dignity within our society, and not something to be condemned as if people are scrounging.
And we need to tax wealth, and not work.
And we could do all of that.
And we could, at the same time, control rents, build homes and reform council tax to also free up more properties for occupation.
We must have political parties that now focus on living standards. The idea that all that matters is balancing the books is crippling the well-being of this country.
If political parties won't name this crisis, it's down to us to do so.
We should talk about the economic and moral failure which is at the heart of Labour.
We need a politics of care. It's time to change everything, and if you believe that that's true, have a look at the transcript of this video, which is on my blog, and the link is down below this video in the YouTube description, and on that transcript, you will find a Chat GPT prompt to write a letter to your MP on the issues I've raised in this video. If you feel passionate about this, please send that letter because everything has to change.
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I am of the opinion that the amount of our disposable income is the key to a stimulating and expanding economy.
So knowing where my disposable income has gone, is also the key to determining what has screwed us over.
High energy costs, water and rail fares for starters. When I was young I never needed to think twice about whether I could afford any of them.
And finally high rents and mortgage costs, which feel about the same, but I can no longer afford to buy a house.
Big corporations are taking an unfair slice of my pie.
Correct
ChatGPT prompt not on the blog post.
Added now
Sorry
The UK economy is stagnant either through malice or incompetence (I favour mostly the later, with a touch of the former).
In general I agree with your analysis.
On a macro sale it’s because the government is not spending enough money. That should be obvious. If you want to grow the economy it needs more money and the government simply isn’t providing it. Every business person knows that in order to grow you have to invest. The government isn’t investing, indeed it’s asset striping the economy (in the same way that Thames water is asset striping a monopoly utility). And it’s giving the money to the wealthy, who don’t spend it. So the economy stagnates.
If the economy is to grow the government has to spend more. The fiscal multiplier for spending on the NHS, for example, is more than two. That means for every pound the government spends on health the economy grows by twice as much. Again that should be obvious. Money spent on health flows directly into the economy (in staff wages and purchasing medical supplies etc). That’s directly a fiscal multiplier of one. AND more people get well, fewer are sick, and so they can contribute more to the economy. That’s the part of the fiscal multiplier that brings it to more than two. So if the government spends more on health it pays for itself as the economy grows. Other public services behave similarly.
Any business person who was told that if the invested money it would both be returned two fold, AND their income would increase, would jump at the opportunity. Yet the government refuses to spend. Utter madness.
The government cannot, of course, spend unlimited amounts. Trying to do so would, ultimately, cause inflation. But that will not happen until the economy overheats. That is, until it is producing at near maximum capacity. Anyone who thinks the economy is producing at near maximum capacity at the moment needs a serious reality check. So the government could spend a lot more but it doesn’t. Utter madness.
And, of course, you can’t simply spend a lot more immediately because people and organisations take time to change. But the government could start the process but chooses not to. Utter madness.
Simultaneously we need to tax the wealthy more. That’s NOT to pay for government spending. The government creates money for that, it doesn’t need to tax anyone to spend (though it has to recover the money it has spent through tax to, ultimately, prevent inflation). Money taxed from the wealthy does not prevent inflation (much) because they have a low propensity to spend. Money taxed from them was mostly sitting in savings etc and was not circulating in the economy. So it could not contribute to inflation. But, yes, we need to tax them to redistribute wealth, to create a fairer society more free from political influence purchased by the wealthy. And we need a more equal fairer society because it is both more productive and people are happier (including the wealthy). But the government doesn’t tax the wealthy, instead it reduces benefits to the poorest, most disadvantaged, in our society. Utter madness.
Add: We need to put a stop to all forms of financial engineering, including new ones as they arise, as these always provide mechanisms for a few to benefit at the expense of the people
I was expecting a post like this as I was reflecting on these matters the other day.
I have come to the solemn conclusion that democracy in this country is being deliberately retarded. That is what is screwing us.
Why? Because the Neo-liberals know that the game is up. It was definitely up in 2007/8, but because of weak leadership, governments blinked first and capital got away with murder. Emboldened without being challenged, we have this from crap the Neo-liberal project.
Democracy you see is risky to Neo-liberals because it has the possibility to deliver change and in this case, possibly a more left or progressive politics that would claw back the gains of capital and stop the handover of power to the ‘market’ (BTW, the market is just a showroom for the rich – that’s all, there’s no real competition, no real market in Neo-liberalism – its your local economy, your public services all up for sale).
So, this possibility of democracy has to be snuffed out – austerity being the chief tool because withdrawing money impedes the social organisation of labour and consumers, of ‘us’ basically.
To replace democracy, we have identity politics, imagined enemies, the rich and the royal family to slather over, lots of sport (oh lots of sport!) delivering the pseudo conflict to replace the real conflicts of interest that we have to address and are not being allowed to. ‘Distraction conflict’ is a big part of of managing Neo-liberal societies. Oh, and we have our ‘glorious history’ to fall back on too.
But my point is this: this awfulness, this uncaringness that we live under – as bad as it is – is also in some way indicative of something that is a silver lining. And that, as I said before, is that the Neo-liberal game is actually up. We – the people – know something is really wrong. The neo-liberals know this, and I think they are scared of losing control. So, being the natural monopolists that they are, they double down on economic suppression and try and give us other things to think about and try to destroy our hopes.
In other words this cruelty we live under is desperation and driven by fear, like a manipulative partner in a relationship realising that they are losing their hold on their abused partner, who resorts to violence to maintain control (I’m thinking here of Quaker meetings being raided by the police and others being proscribed as terrorists) .
I’ve been coming here a long time, and my blunt assessments of things sometimes convey maybe an air of hopelessness. But I feel sure that what I have described above is correct. Corbyn really put the wind up them in 2017, and look at the response – look at how dirty that was. They are capable of anything. Prior to that New Labour’s talk of ‘stakeholder economy’ was snuffed out with the connivance of its leader and yet again Labour has a leader who has ben turned.
The epiphany will not be televised (to riff off one talented black brother) but that fact that it will not, speaks for itself. So, keep the pressure on is what I say.
Thanks
So true, ‘The Revolution will not be televised’ so we really do need to carry on chipping away in anyway we can.
Is this due to a disproportionate emphasis on policies that benefit pensioners who vote? The outworking of this is that the average person of working age gets poorer to keep our growing pensioner population in a largely very comfortable lifestyle. It seems that thanks to the triple lock and the fact that the majority live in homes they own, most are insulated from what is happening. I speak as someone over 60 waiting another 7 years for the pension I expected to get when I started work and seeing those in their 70s and 80s often totally unaware of the struggles of the younger adult population.
You are making some HUGE assumptions about pensioners there.
A huge number do not own their homes but are paying rent until they die. Their only income is the state pension, which is not enough to live on. Many have additional living costs because of the health effects of ageing – one of the classics of that is feeling the cold more and suffering serious medical effects from being cold.
Yes, there is the triple lock, but I understood that was brought in to try to improve English pensioner income which is very low compared with much of Europe.
One of the classic tactics of the neolibs is to set up tagets for the majority to blame for their poverty – pensioners are one target, immigrants another.
“I understood that was brought in to try to improve English…”.
UK=England=Great Britain, yet again?
It’s time you learned the difference. The State Pension is not devolved!
That’s exactly what is expected, setting off old against young and I resent the implication.
My pension is less than £250 a week and I own my own home, but can’t afford to have the flat roof over the kitchen replaced. The only reason I get that much pension is because my husband died in 2012 and I got half of his state pension.
So thanks a lot for making me feel good about my fantastic way of life.
And the “whatabootery” starts…we all know those of who Hazel has mentioned above.
She did not, however, state that all pensioners are wealthy.
The ability to “victimise” one’s self is another way the neo-liberal system divides and conquers.
Better to acknowledge and present that, like any age-group’s wealth, there are exceptions that span the spectrum?
Very powerful Richard. Thanks. Letter on its way.
The real economy is dying and Westmister’s prescription continues to be nil by mouth.
Or put another way, the ruling class love socialism, as long as it’s socialism for the rich.
I noticed a suggestion yesterday that Reeves may freeze tax thresholds (for longer, presumably, as the basic rate is frozen already) to make up the planned loss from the PIP débacle.
Nobody notices fiscal drag, do they? The pension goes up, the wages go up… but the percentage of tax taken goes up too. And the poor pay the most.
I do wonder how many people can actually check their P60 and calculate their % tax rate. One doesn’t have to be a genius accountant.
In my humble opinion, a rentier society, in the end, just consumes itself.
That’s enough of a reason to seek radical change.
Hi Richard,
I still want to know how we got to a point where there is little regard for the truth.
The fact that in the UK, Covid was handled badly which cost in round figures I believe £400 Billion. Of which £36.5 Billion according to the commons accounts committee was entirely wasted. Then there was PPE on top. What happened to all this money?
Before this the PPI scandal where no one was prosecuted, while the head of the FCA at the time was a one Andrew Bailey. Things have gone from bad to worse for a long time.
The money went to people – on furlough, businesses, and other government spending not covered by revenues at that time.
The question is where the money ended up. Directly, it paid wages, etc, but most employees didn’t get rich. Some businesses had stable revenues and used furlough to reduce costs to turn a big profit. Households with high discretionary spending weren’t going on holidays or to events, so their saving rate skyrocketed.
Ultimately the beneficiaries of that COVID support was overwhelmingly the rich.
Gary Stevenson talks a lot about this.
Just one question, where is the ChatGPT link. I’ve listened to Gary Stevenson on this too and I can see the sense in it. I would like an easy way to write a letter to my MP about it. Incidentally, I’ve heard it mentioned that the Green Party are actually promoting taxing wealth, is this something you’ve heard too?
1) Apologies – I really thought it was there. Added now.
2) Thet are and that is the wrong policy. See the Taxing Wealth Report 2024
Interesting comment here
https://x.com/tomhfh/status/1938674715251417391
Reopening a 3.3-mile train line to Portishead from Bristol took 79,187 pages of planning documents.
Printed out, that’s 14.6 miles of paperwork – 4.5 times the length of the actual railway.
The process has taken 16 years.
I must declare an interest, although I dont remember it apparently my father took me on it before the line closed and at the GW150 celebrations I did a few trips on it in the ‘Celebrity’ Chocolate and Cream liveried Class 117
In the same way HS1, the high speed rail link to the channel tunnel wasnt completed until several years after the tunnel was completed, etc etc
We seem to sabotage any attempt to invest in the UK unlike The French
Meanwhile, listen to this absolute prat from the IEA lament his “way of life” being under attack.
https://m.youtube.com/watch?v=jZHE0xuhB4s
Makes my blood boil.
We also have the infrastructure, and land in particular, being bought by private equity or investment corps, many of them foreign.
This should wake Labour up (but I somehow doubt that it will).
Labour’s relationship with working class ‘broken’ as analysis (by YouGov) reveals it is now the party of the wealthy. Britons earning more than £70,000 are more likely to vote Labour.
Meanwhile, poorer voters are turning to Reform.
Wake up and smell the coffee time.
https://www.independent.co.uk/news/uk/politics/labour-polls-starmer-reform-yougov-benefits-b2776847.html
Indeed
Brilliant Richard , if only we had a Party to vote for that had a Manifesto like that ……
Thanks for writing out what ails the UK.
Those who faithfully continue to adhere to the quasi religious ideology of neoliberalism are experiencing the disillusion of their Gods of the marketplace failing. They are refusing to accept this truth so instead strike out at others in their society whom they blame and shame for their own lack of vision. As Pilgrim Slight Return has written, leading to their political conclusion that ‘democracy has to be snuffed out’.
There is a symbolic parallel to the neoliberal reactionary need to snuff out social democracy and the existential rise in toxic air pollution in the UK which continues to be a silent and silenced killer, especially of children, the elderly and those struggling economically.
https://www.theguardian.com/society/2025/may/12/asthma-minority-ethnic-patients-health-inequalities-england
I agree with the point of the article, but there is a particular problem relating to mortgage interest rates. Housing costs are far too high, and cutting the mortgage interest rate would help existing house purchasers. However, anything that makes house purchase easier allows house prices to rise which means that landlords will raise rents. The housing market ever since Margaret Thatcher persuaded people to see property ownership as a way of generating wealth rather than a means of gaining a stable place to live.
So, we need more comntrols.
And we need better social housing.