UK PM Starmer targets higher household incomes, waters down economic growth pledge

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Starmer: UK will "aim" for highest sustained GDP growth in G7

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Government targets rising living standards in every part of UK

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Real household disposable income has been historically weak

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OBR projects only a modest improvement this parliament

(Adds details on targeting regional and national GDP-per-head, housing target, bullet points)

LONDON, Dec 5 (Reuters) - British Prime Minister Keir Starmer said on Thursday his government's progress in boosting the economy should be judged by using data on household disposable income and GDP per capita over the five-year parliament.

The government would "aim" for the fastest economic growth per capita in the Group of Seven advanced economies, which represents a dilution of what was previously a "pledge", according to a document setting out Starmer's plans.

It also promised to deliver higher living standards across every region of the United Kingdom by the end of the parliament.

"We will measure headline progress against this milestone through higher Real Household Disposable Income (RHDI) per person and Gross Domestic Product (GDP) per capita by the end of the parliament," the document said.

Household disposable income, adjusted for inflation, rose on average by just 0.3% per year between 2019 and 2024, marking the worst parliamentary term for living standards since records began in the 1950s, according to the Institute for Fiscal Studies, a think tank.

The Office for Budget Responsibility, whose forecasts underpin government's budgets, predicts only a small improvement during the current parliamentary term, which looks on track to be the second-worst in terms for growth in disposable income.

Britain's government had previously pledged to deliver the fastest growth in per-capita GDP in the G7 for two years running by the end of the parliament - something that has never happened according to OECD records that date back to the 1970s.

The government will track GDP-per-head at both regional and national levels, the document said.

Starmer's said his plans to deliver on election pledges would mean working people would have "more money in their pocket". He also reiterated Labour's plan to build 1.5 million new homes in England.

Labour won a sweeping majority in July, taking power for the first time in 14 years, but has fallen behind the opposition Conservative Party in some recent opinion polls. (Reporting by Alistair Smout, Muvija M and Andy Bruce; Writing by Catarina Demony and Andy Bruce; Editing by William Schomberg)