UK Household Incomes Stagnate, Propped Up by Benefits
Official figures show real disposable incomes per head saw minimal growth, primarily driven by increased social benefit payments.
Real household disposable incomes (RHDI) per head in the United Kingdom remained largely stagnant in the last two years of Keir Starmer's premiership, with higher benefits acting as the sole support for households. This metric, which measures income after taxes, benefits, and inflation, showed a slight increase in the second quarter of the current year but was primarily boosted by government payouts.
Official figures from the Office for National Statistics (ONS) indicate that RHDI per head dropped in four of the last eight quarters, reflecting the pressures of tax increases and broader cost-of-living challenges. When the Labour party came to power in the third quarter of 2024, RHDI per head stood at £6,538. By the first quarter of the current year, it had fallen slightly to £6,511.
The ONS data released today shows a 1% rise in RHDI per head to £6,577 in the second quarter. However, the ONS attributed this growth entirely to a 1.1% increase in 'social benefits other than social transfers in kind.' These are direct cash payments such as the state pension, universal credit, and Jobseeker's Allowance. Many of these benefits were uprated by at least 3.8% in April in line with inflation, with universal credit receiving an additional 2.3% boost and the state pension rising by 4.8% under the 'triple lock' system.
In contrast, rising wages contributed nothing to the increase in RHDI per head, and the impact of taxes was described as marginal. The stagnating disposable incomes contrast with more positive economic news, as the ONS revised its GDP growth figures upwards for the second quarter. The economy grew by 0.5% between April and June, an improvement from the earlier estimate of 0.4%, driven by a stronger services sector. This follows a 0.6% growth in the first three months of the year.
However, revisions to previous data also revealed a weaker economic performance in 2025 overall, with growth revised down from 1.3% to 1.2%. Chancellor John Healey acknowledged the global pressures, including those stemming from the Iran war, but welcomed the upward GDP revision, stating it indicated the UK had the fastest G7 growth this year. He emphasized the need for continued efforts to drive growth across the country.