Regional Regeneration and the Outlook for the Devolved Nations and the English Regions

Arnab Bhattacharjee, Eliza da Silva Gomes (), Adrian Pabst, Robyn Smith and Tibor Szendrei

National Institute UK Economic Outlook, 2024, issue 16, 43-88

Abstract: While aggregate real personal disposable income will grow in 2024-25 and 2025-26, living standards – as measured by equivalised household real disposable income (eHRDI) which reflects household composition and housing costs – for average UK households will not return to pre-2022 levels before the end of 2025-26. The distributional picture varies significantly across the income distribution: for households in the bottom-income decile, living standards as measured by eHRDI are lower by around 20 per cent in 2024-25 compared with 2021-22; for income deciles 2-4, the fall in living standards is on average around 5 per cent. The slow recovery in living standards affects the bottom 40 per cent of the income distribution most: we find that for the bottom 40 per cent of UK households, living standards will not return to pre-2022 before the end of 2026-27 as the costs of rents and mortgages are largely cancelling out the gains from real wage growth. The raft of tax and spending decisions in the Budget have a broadly regressive impact on the bottom 40 per cent of UK households: while the increases in the National Minimum Wage (NMW) for 18-20 year olds of 16.3 per cent and the National Living Wage (NLW) of 6.7 per cent are very welcome for households in income decile 1, households in income deciles 2-4 will be hit by the government's decision to maintain the freeze of the personal tax allowance at £12,570 per year and the income tax thresholds until 2028. This will be compounded by employers passing on some of the costs of higher National Insurance Contributions to employees. The cut to the winter fuel allowance will hit pensioners on low incomes, and we would recommend that the government postpone the implementation until next winter: this would avoid hardship this winter while also allowing Local Authorities in close coordination with DWP to improve the take-up of this benefit by eligible pensioners who have not yet signed up. Gaps in the provision of public transport have widened across the country in the period 2019-2023: this has an adverse impact on access to employment, productivity and well-being, though the Budget includes some welcome announcements about more investment in cross-country train lines in the North of England. Ahead of the English Devolution White Paper, we reiterate our call for at-scale investment, delegating skills spending to city-regions and Local Authorities as well as genuine fiscal decentralisation: sustained regional regeneration requires tax-raising and spending powers at lower tiers of government rather than top-down control.

Date: 2024
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Journal Article: Regional Regeneration and the Outlook for the Devolved Nations and the English Regions (2024)
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