Resolution Foundation finds working families £2,900 a year worse off

Typical working-age households are £2,900 a year worse off this year than they would have been had inflation stayed at 2 per cent over the past five years, according to analysis published by the Resolution Foundation on 8 October 2026¹. The report, Counting the cost, was funded by the Nuffield Foundation¹.

The study says the past five years delivered 13 years' worth of "normal" inflation, with inflation peaking at 11.1 per cent and prices nearly 30 per cent higher in August 2026 than in July 2021¹. It puts the shortfall at £2,900, or 7.9 per cent, for a typical working-age household in 2026-27¹. Energy was at the centre of the shock: by autumn 2022 household energy bills had more than doubled since the start of the crisis, food inflation peaked at nearly 20 per cent in March 2023 and services inflation reached 7.4 per cent in July 2023, its highest in more than three decades¹. Energy bills and food together account for a quarter of the change in the price level over the period¹.

The report says the pain was not shared equally. The rise in non-housing costs since before the pandemic has been around one-sixth bigger for the poorest tenth of households than for the richest tenth¹. Between 2020-21 and 2026-27, real median income after housing costs for non-pensioners looks set to fall by 1.3 per cent (£450), with incomes at the 25th percentile down 1.2 per cent (£270) and those at the 75th percentile up 0.3 per cent (£130)¹.

Source: Resolution Foundation¹

The report also records how households responded. An extra 1.7 million households said they could not keep warm enough in 2022-23 compared with 2021-22, 950,000 of them in the poorest 40 per cent of the population, and the poorest tenth of neighbourhoods cut energy use by 15 per cent more than the richest in 2023¹. By March 2026, 18 per cent of households in the poorest half of the country were behind on a priority bill, up from 10 per cent in September 2020¹. Energy debt has more than tripled in real terms since 2018 to £5 billion, and Council Tax arrears in England are up 117 per cent since 2012-13 to £7.5 billion¹.

Separately, the Trades Union Congress said households have paid an additional £13,961 on bills on average since 2021, an extra £2,792 a year². That figure measures extra spending on bills, whereas the Resolution Foundation's £2,900 measures the shortfall in real income against a 2 per cent inflation path, so the two are not directly comparable¹.

Why it matters for households

The £2,900 figure is a comparison with a counterfactual, not a bill: it describes how much lower real incomes are this year than they would have been under 2 per cent inflation¹. The report says the hit is similar in scale across the income distribution, but that lower-income families have cut heating hardest and are falling behind on bills fastest¹. It also notes that the Energy Price Guarantee cost over £20 billion and was paid regardless of need¹. Arrears on energy, water, Council Tax and rent are the visible consequence for household budgets¹.

What happens next

The report was published as the Government considers fresh cost of living support in the upcoming Budget; no date for the Budget is given in the report¹. The Resolution Foundation argues any new support should be targeted at poorer families, with energy bills the priority¹. The TUC's general secretary, Paul Nowak, called for the chancellor to shield households from energy spikes².