Families on benefits look set to be the only winners from Labour‘s time in power – with middle-income households on track to get poorer for years to come.
A think-tank has highlighted the grim picture behind Rachel Reeves‘ claim that people will be £1,000 a year off in real terms by the next election.
In its analysis of the Spring Statement, the Resolution Foundation pointed out that most of the boost to real household disposable incomes (RHDI) had already happened and the outlook for the rest of the Parliament is ‘bleak’.
The body’s own calculations excluding pensioners suggests lower-income households are due to see their living standards rise by 3.9 per cent, or £800, between 2025-26 and 2026-27. That is ‘driven’ by abolition of the two-child benefit cap and an above-inflation increase in the basic rate of Universal Credit.
But families on ‘typical’ incomes will only see a £300 boost over the period, and those in the better-off half of the distribution will see no improvement.
Everyone is projected to see their disposable income decline over the rest of the Parliament, and households with above-average incomes will be worse off in 2028-29 than they were in the year Labour came to power.
The 0.6 per cent improvement in RHDI over five years Ms Reeves boasted about would still be the second-worst on record, according to the Resolution Foundation.
The think-tank said Labour has another headache in the shape of child poverty. While scrapping the two-child benefits cap has substantially reduced the level, it is predicted to rise for the next three years.
A think-tank has highlighted the grim picture behind Rachel Reeves’ claim that people will be £1,000 a year off in real terms by the next election
The Resolution Foundation’s own calculations of changes in disposable incomes for different households suggest that only poorer families will see an improvement between 2024-25 and 2029-30
The Resolution Foundation calculated that all households saw disposable incomes fall in 2025-26, while in 2026-27 improvements will be largely in the lower ends of incomes
And even that dismal performance is likely to be crashed by the gathering Middle East crisis, which has already sent oil and gas prices spiking.
Resolution Foundation chief executive Ruth Curtice said: ‘If recent rises in the price of oil and gas were to be sustained they could add around a percentage point to inflation and £500 on to typical annual energy bills.
‘The latter increase would be particularly damaging for poorer families as they spend more than twice as much of their budgets on energy as richer households.
‘And while the near-term picture for living standards is positive, the picture for the remainder of the Parliament is far bleaker.
‘The Foundation projects that after next year, the incomes of typical working-age families are projected to fall by 0.5 per cent, or £150, for the remaining two years of the Parliament (2026-27 to 2028-29).
Ms Curtice said that was based on the OBR’s forecast for wages, which it expects to grow by just 1.4 per cent over the next three years.
Separate estimates from the Bank of England are higher, which could change the balance on RHDI.
The Foundation’s forecast for child poverty follows a similar pattern. A significant fall in 2026-27 of 3 percentage points, or 480,000 children, is followed by a steady rise over the next three years. Over the Parliament as a whole (2024-25 to 2029-30) child poverty is set to fall marginally by 0.5 percentage points.
The think-tank said Labour has another headache in the shape of child poverty. While scrapping the two-child benefits cap has substantially reduced the level, it is predicted to rise for the next three years
