Living standards are projected to fall by £500 on average for the poorest half of households over the next five years, according to overnight analysis of Spring Statement by the Resolution Foundation.
This is despite Chancellor Rachel Reeves claiming households will be £500 richer as a result of her policies during yesterday’s fiscal announcement.
The combination of a weak economic outlook and benefit cuts that disproportionately impact lower-income families is understood be driving this decline.
This represents a three per cent drop in average income across the poorest half of working-age households.
Public services continue to be under pressure, with real per capital spending in 2029-30 broadly in line with 2015-16 levels.
Now the Office for Budget Responsibility has revised up its forecast for growth to 1.8 per cent between 2026 and 2029.
New research from the Resolution Foundation is debunking claims made by the Chancellor during her Spring Statement
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This projection sits well above the Bank of England and all other independent external forecasters. If the economy were to follow the average external forecast instead of the OBR’s optimistic outlook, output in 2029 would be £24billion lower.
It would reduce revenues by around £10bn and completely wipe out the Chancellor’s fiscal headroom.
The welfare savings announced in the Spring Statement amount to £4.8bn, but the full scale of cuts is far greater at £8.1bn in 2029-30.
This larger figure emerges after accounting for the £1.9bnn boost to the standard rate of Universal Credit.
It also factors in the “gain” from not implementing previously planned changes to the Work Capability Assessment.
The cuts primarily target ill-health, disability and carer’s benefits, and will continue to grow over time.
These reductions will create significant holes in the welfare safety net for vulnerable households.
Welfare changes will create a mix of small cash gains and huge losses for different households, according to the Resolution Foundation.
A non-disabled couple on Universal Credit will see their support rise by £370 a year.
In stark contrast, a couple on Universal Credit where one person is disabled and the other is a full-time carer could lose £10,300 a year.
These losses would come from cuts to PIP, the UC carer element and the UC Health cut.
The think tank claims transitional protections are needed to prevent such sharp income shocks for vulnerable households.
The second poorest fifth of households will see their incomes reduced by 1.5 per cent. This compares to just a 0.6 per cent fall for the richest fifth.
Ruth Curtice, Chief Executive of the Resolution Foundation, said: “High debt servicing costs, weak tax receipts, and the need to reassure jittery markets, meant the Chancellor had to announce tax rises or spending cuts in her Spring Statement.
“She chose to focus the bulk of her consolidation on welfare cuts. These cuts have been justified on the basis of getting people into work, but it is questionable how much of a jobs boost they’ll deliver.”
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“After all, the bulk of the cuts are to disability benefits which aren’t related to work, and the cuts take effect from 2026, three years before the Government’s employment support programme kicks into gear.”
Curtice added: “While the OBR’s outlook for growth today got gloomier, it is far more optimistic about Britain’s medium-term economic prospects.
“The Chancellor will hope that reality catches up with the OBR, rather than the OBR falling back to reality, otherwise more tough choices await.
“Britain’s poor economic performance, combined with policies that bear down hardest on those on modest incomes, mean that 10 million working-age households across the bottom half of the income distribution are on track to get £500 a year poorer over the course of the Parliament.”
