Disposable income has fallen for the fourth month in a row, with new data revealing that one in five UK households can no longer afford to cover their weekly essential bills — piling pressure on Chancellor Rachel Reeves just days before her tax-raising Budget.
The latest Asda Income Tracker, compiled by the Centre for Economics and Business Research (Cebr), shows that low- and middle-income families — who make up 60% of all UK households — continue to face shrinking spending power as wage growth fails to keep pace with rising taxes and essential costs.
Households in the lowest income quintile, earning an average of £11,000 a year, ended October with a £74 weekly shortfall, 7% worse than last year. Those in the second-lowest bracket had just £10 left after essentials, a deterioration of 17% year on year. Middle-income families (£41,000 average) were left with £90 — a marginal fall of 1%.
By contrast, the wealthiest 20% of households ended the week with £909 of discretionary income, up 2% on last year, illustrating the widening divide in household resilience as inflation and tax pressures mount.
The tracker shows essential costs rose 4.6% year on year, driven by food, housing and utilities — categories that account for a disproportionately large share of expenditure among lower-income families. Younger households face the greatest squeeze: those under 30 spend 69% of gross income on essential items, largely due to soaring rental costs.
The warning comes as unemployment hits 5%, labour market conditions weaken and Reeves prepares to unveil a Budget expected to include further fiscal tightening to address a £20 billion shortfall.
Sam Miley, head of forecasting at Cebr, said the outlook remained fragile despite easing inflation.
“Worse-than-expected labour market figures for September show weakened demand and rising employment costs,” he said. “Prospects for the UK economy are not helped by the high likelihood of fiscal contraction in the November Budget.”
Monthly disposable income dipped again in October, falling by £1.01 from September, with average household purchasing power now standing at £253 per week — the same level recorded last December.
Gross household income grew by 3.6%, slightly slower than the previous month. Those aged 30–49 recorded the highest average income at £1,384 per week, followed by those 50–64 at £1,264.
Economists warn that lower earners face further pain over the Christmas period as living costs remain elevated, while any tax rises in Wednesday’s Budget risk intensifying pressures on already vulnerable households.