The think tank’s analysis of yesterday’s Spring Statement concluded that the combination of a weak economic outlook and benefit cuts that fall disproportionately on lower-income families mean those on lower incomes will be significantly worse off.
The warning contradicts Chancellor Rachel Reeves’ declaration that the Spring Statement will leave UK households £500 better off.
Resolution Foundation described the economic outlook for the UK as “gloomy”. GDP per capita (one of the Government’s targets for growth) increased by less than 1% in 2023 and 2024, and is set to grow by just 0.2% in 2025. Analysts said this was the first three-year period of “consecutive anaemic growth” since the early 1990s.
The Office for Budget Responsibility (OBR) revised up its forecast for growth to 1.8% between 2026 and 2029 – well above the Bank of England and all other independent external forecasters.
But Resolution Foundation warned that if the economy were to follow the average external forecast over this period instead of the OBR’s, output in 2029 would be £24bn lower, reducing revenues by around £10bn and wiping out the Chancellor’s headroom.
The think tank calculated that the £4.8bn welfare savings contain £8.1bn worth of cuts. After accounting for the £1.9bn boost to the standard rate of Universal Credit and the ‘gain’ from not going ahead with scored-but-never-implemented changes to the Work Capability Assessment, cuts to ill health, disability and carer’s benefits rise to £8.1bn in 2029/30, and will continue to grow over time.
According to Resolution Foundation, welfare changes will create a lot of small cash gains in Universal Credit, as well as huge cash losses. For example, a non-disabled couple on Universal Credit will see their support rise by £370 per year.
But a couple on Universal Credit where one is disabled and the other is a full-time carer could lose £10,300 per year from the Personal Independence Payment (PIP), the Universal Credit carer element and the Universal Credit health cut. Analysts said transitional protections are needed to prevent such sharp income shocks.
The think tank calculated that the overall impact of all tax and benefit changes taking effect in this Parliament will reduce the incomes of the second-poorest fifth of households by 1.5%, compared to just a 0.6% fall for the richest fifth. This will result in falling living standards for lower-income families.
‘Outlook for living standards remains bleak’
Ruth Curtice, chief executive of 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. After all, the bulk of the cuts are to disability benefits [that] aren’t related to work, and the cuts take effect from 2026, three years before the Government’s employment support programme kicks into gear.
“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.
“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 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.”
