'Grim picture' for family finances as Budget forecasts reveal years of pain - in blow to Burnham's 'breathing space'

Updated: 03:52 EDT, 29 October 2026 Families face getting poorer over the next two years as they are squeezed by the rising cost of living and higher taxes according to ‘grim’ Budget forecasts.In a blow to Andy Burnham’s pledge to deliver ‘breathing space’, the Office for Budget Responsibility (OBR) said living standards would shrink as soaring energy prices bite.At the same time, it expects Britain’s tax burden to soar to a record 37.9 per cent of gross domestic product (GDP) by next year before peaking at 38.6 per cent.It adds up to a prediction that by 2030, households will barely be any better off than a decade earlier.Even the Resolution Foundation, Labour’s favourite think-tank, said the outlook for family living standards, was ‘dire’. Burnham's 'breathing space' is not enough to reverse a downward trend for living standardsThe dismal outlook came as the OBR also sharply downgraded its outlook for GDP growth next year, with gross domestic product (GDP) set to rise by just 1 per cent, down from 1.6 per cent.Its figures pour cold water on Mr Burnham’s promise to revive prosperity and deliver ‘growth in every postcode’.Chancellor John Healey trumpeted the better than expected performance of GDP so far this year as the growth outlook for 2026 was upgraded from 1.1 per cent to 1.2 per cent.But the OBR expects the impact of higher fuel and energy prices caused by the Iran war - already squeezing consumers – to come through in full next year as the pain worsens.The watchdog downgraded its forecast for real household disposable income per head – a measure of household spending power after accounting for taxes and inflation.OBR chief Jonathan Haskel said by that measure, living standards ‘took quite a beating during the pandemic years’.Its previous forecast in March this year pointed to a recovery – before the impact of the war took hold.‘We’ve changed that forecast to show a dip for the next couple of years,’ Mr Haskel said.The OBR said the fall is caused by subdued wages as well as the freeze on income tax thresholds which is dragging many more people into paying higher rates, the OBR said.It adds to an extended period of flatlining living standards since the Covid pandemic. Over the decade from 2020, living standards are expected to have grown by just 1 per cent.OBR economist David Miles said: ‘It’s a pretty grim picture.’He said that since Covid there had been ‘virtually no growth in per person real household disposable income’ adding ‘that’s pretty unusual in the history of the UK’.Miles added: ‘It’s to quite a substantial extent just a reflection of very big increases in energy prices which is very hard for the UK to avoid – we’re a very big importer of energy.‘If we take a ten year period starting just before Covid… we may be 1 per cent higher… that’s negligible growth every year.‘It’s been a dismal period in British economic history.‘There’s one final reason… revenues are going to rise faster than GDP – the tax take which has risen by a fair amount just carries on, on that trajectory.’The Resolution Foundation said: ‘The OBR forecast shows that Britain is in the midst of a living standards crunch.’Real household disposable income per person is now £420 lower than two years ago, the think-tank said, and would not recover to this level for two more year.‘As a result, the medium-term prospect for family living standards is dire,’ it added.It means this Parliament will be the second worst for living standards since the 1950s – only beaten by the last one.> Chancellor's numbers only add up because they were made up, warns leading economist DIY INVESTING PLATFORMSAJ BellAJ BellEasy investing and ready-made portfoliosHargreaves LansdownHargreaves LansdownFree fund dealing and investment ideasinteractive investorinteractive investorFlat-fee investing from £4.99 per monthFreetradeFreetradeInvesting Isa now free on basic planTrading 212Trading 212Free share dealing and no account feeAffiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.Compare the best investing account for you