The Resolution Foundation is warning that something is very wrong after the UK chancellor’s spring statement. They admonish that by the end of this decade, poorer households might be £500 a year worse off. The thinktank believes 800,000 claimants will see their personal independence payments cut. According to the government’s own estimates, this amendment would save the Exchequer £8.1 billion by 2029-30. These cuts are made as a continuation of general expenditure cuts to achieve adherence to tight fiscal regulations.
The chancellor speaking to Parliament today. He was able to respond directly to a surprisingly positive report from the Office for Budget Responsibility (OBR), the Treasury’s independent forecaster. The OBR has cut its growth forecast for 2025 from 2% to 1%. They have made modest improvements to future outyear projections. Despite these adjustments, the chancellor’s claim that people would be “on average over £500 a year better off” under the Labour government contrasts sharply with the Resolution Foundation’s findings.
Ruth Curtice, chief executive of the Resolution Foundation, expressed concern about the economic outlook:
“The outlook for living standards remains bleak. Britain’s poor economic performance, combined with policies that bear down hardest on those on modest incomes, mean that 10m 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.” – Ruth Curtice, Resolution Foundation’s chief executive
Chancellor Reeves has restored a surplus of £9.9 billion in day-to-day government spending to meet a budget rule requiring balanced income and expenditure by the parliament’s end. The National Institute of Economic and Social Research noted that her hard-and-fast budgetary rules necessitate twice-yearly spending revisions. This strategy is detrimental to long-term public sector planning.
An estimated 250,000 more people, including 50,000 children, will face relative poverty after housing costs by decade’s end due to tightened welfare policies, according to an impact assessment by the Department of Work and Pensions. In addition, the lives of around three million households on incapacity benefits will feel the impact of these reforms.
James Smith, a research director at the Resolution Foundation, commented on the decade’s economic challenges:
“The 2020s are looking like being a disaster for living standards, even compared to the previous decade.” – James Smith, Resolution Foundation
Rachel Reeves defended her reforms, asserting their potential to improve living standards by increasing employment.
“I am absolutely certain that our reforms, instead of pushing people into poverty, are going to get people into work. And we know that if you move from welfare into work, you are much less likely to be in poverty.” – Rachel Reeves
As the genesis for this new uncertainty, economists have repeatedly warned of potential dangers surrounding the upcoming autumn budget. Opposition critics found considerable fodder in Reeves’ public finance malpractice. Unions argue that recent policy shifts are a sign of an austerity reboot.
The United Kingdom’s economic growth will be 1.9% by 2026. It will slowly drop to 1.8% in 2027 and 2029, and then even more to 1.7% in 2028. Those potential tariffs, as threatened by new US president Donald Trump, could wipe out Reeves’s fiscal cushion of £9.9 billion.