Publication type
Report
Author
Publication date
March 15, 2021
Summary:
This document sets out the impact on household finances of the government’s decisions since Spending Round 2019 (SR19) and recent trends in living standards. Households’ living standards are affected both by the general performance of the economy and by the direct impact of government decisions. A strong economy means there are more job opportunities and wages are higher. The government’s stewardship of the economy, such as through fiscal policy and the regulatory environment for businesses, influences these factors. In addition, policy decisions, for example about whether to raise or cut particular taxes, or to invest in public services, have a direct impact on household living standards. This document is split into three sections: Chapter 1 describes recent trends in living standards, earnings, and employment, as well as illustrating the impact both COVID-19 and the government policy response has had on households’ incomes over the last year; Chapter 2 estimates the direct impact of policy decisions on households’ future living standards; and Chapter 3 details the data sources and methodology used for this analysis. The analysis in Chapter 2 reflects the impact of measures announced since SR19, including Budget 2021 measures listed in Table 2.1 of the Budget document where there is a direct, quantifiable impact on households. The analysis in this document shows: 1) in the years prior to the COVID-19 pandemic, real median household income growth was greater in the lower- and middle-income quintiles than in the highest income quintile 2) the UK labour market was performing strongly, with earnings growth strongest amongst the lowest earners and the employment rate reaching a record high 3) the COVID-19 pandemic has brought with it significant economic disruption, with the UK suffering its biggest annual fall in output in 300 years in 2020 4) despite such a deep recession, the labour market has held up well relative to previous recessions, with policies such as the Coronavirus Job Retention Scheme (CJRS) helping to protect jobs during the pandemic 5) the UK unemployment rate has also remained lower than that of comparable groups of countries 6) taken together, the CJRS, other government policies such as the Self Employment Income Support Scheme (SEISS) and increases to welfare have protected those with the lowest incomes the most 7) households in all income deciles are better off in 2021-22 as a result of tax, welfare and public service spending decisions taken since SR19, with the poorest income deciles supported the most as a percentage of net income
Subjects
Links
- https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/966207/DA_Document_Budget_2021.pdf
- https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/966207/DA_Document_Budget_2021.pdf
- https://www.gov.uk/government/publications/budget-2021-documents
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