Tax and inflation rises blamed for fall in real disposable incomes

Households faced a renewed cost of living squeeze in the first three months of the year amid increases in taxes and inflation, official figures show, despite the UK economy growing at the fastest rate in the G7.

- Richard Partington

The Office for National Statistics said an important measure of living standards - real household disposable income per head - fell 1% in the first quarter after growth of 1.8% in the final three months of 2024. The change marked the first quarterly decline for almost two years.

The households' saving ratio - which estimates the percentage of disposable income people save rather than spend - fell 1.1 percentage points to 10.9%, though it remains historically high.

The signs of a fresh hit to living standards come as the latest snapshot confirmed the UK economy grew 0.7% in the first quarter, the fastest rate in the G7 group of rich nations.