Reeves’s statement will leave poorest £500 a year worse off, thinktank finds

Read More

Lower-income households are on track to become £500 a year poorer by the end of the decade as a result of the chancellor’s spring statement, according to analysis by a leading thinktank.

The Resolution Foundation said a combination of weak economic growth over the next five years and benefit cuts that fall disproportionately on lower-income households would result in an average £500 loss over the next five years for those in the poorest half.

Rachel Reeves has received criticism from unions and political opponents after she made £14bn of savings in her spring statement on Wednesday to keep the public finances on track.

Reeves restored a surplus of £9.9bn in the government’s day-to-day spending to meet a budget rule forcing her to balance income and expenditure by the end of the parliament.

The chancellor was responding to a report by the Treasury’s independent forecaster, the Office for Budget Responsibility, that said higher debt interest payments and weaker economic growth would reduce tax receipts and push up Whitehall spending during the parliament.

An estimated 250,000 more people, including 50,000 children, will be left in relative poverty after housing costs by the end of the decade as a result of the government’s squeeze on welfare, according to an impact assessment by the Treasury.

The Resolution Foundation said that about 3 million families on incapacity benefits would be affected. About 800,000 claimants will have reduced personal independence payments, saving the government £8.1bn by 2029-30.

Ruth Curtice, the foundation’s chief executive, said: “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.”

On Thursday morning, Reeves appeared to reject the official assessment of her welfare reforms, and said she was “absolutely certain” people would not be pushed into poverty.

She told Sky News: “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.

“That is our ambition: making people better off, not making people worse off, and also the welfare state will always be there for people who genuinely need it.”

Economists warned of further uncertainty before the autumn budget, while opposition critics accused Reeves of mismanaging the public finances, and unions said the policy changes marked a return to austerity.

The National Institute of Economic and Social Research said Reeves had adopted budget rules that meant she needed to tinker with spending every six months, harming the ability of the public sector to make long-term plans.

The OBR also halved its forecast for growth in gross domestic product in 2025 from 2% to 1%, but upgraded its forecasts for subsequent years.

The UK economy is expected to grow by 1.9% in 2026, 1.8% in 2027, 1.7% in 2028 and 1.8% in 2029, although the watchdog warned that tariffs threatened by Donald Trump could wipe out the chancellor’s relatively thin £9.9bn buffer.

The US president announced on Wednesday night he was placing a 25% levy on car imports to the US, sparking further uncertainty over whether the UK will be able to secure a carve-out amid an escalating trade war.

“We are not at the moment in a position where we want to do anything to escalate these trade wars,” Reeves told Sky when asked if Britain would impose retaliatory tariffs against the US. “Trade wars are no good for anyone.”