UPDATE: The latest analysis of Chancellor Rachel Reeves’ Budget reveals immediate implications for millions of families across the UK. Released just hours ago, the data shows significant disparities in how different groups will be affected, with poorer working-age families benefitting while wealthy pensioners face steep losses.
According to the Resolution Foundation, the Budget primarily favors poorer working-age families, who stand to gain an average of £90 annually. In stark contrast, the wealthiest half of the population is projected to lose around £1,000 each year. The report underscores a troubling trend, as poorer pensioners are set to lose an average of £220, while wealthier retirees will be £680 worse off under Reeves’ plan.
The analysis highlights a critical shortfall in the Budget: the decision not to raise income tax by even 1p has left individuals earning less than £35,000 significantly worse off. Experts warn that while Reeves aimed to tackle cost of living challenges, she might have “delayed the pain” of necessary tax reforms amid forecasts of a difficult economic decade ahead.
Critics are raising alarms over the freezing of income tax thresholds, which will force many to pay more tax as their wages increase. The Resolution Foundation notes that nearly all but the top 10% of earners will feel the pinch due to this choice. Their findings reveal that three in five families benefiting from the two-child benefit limit include at least one working individual.
In a striking development, 560,000 families are expected to gain an average of £5,310 in 2029-30 after the controversial cap on child benefits—introduced by the previous government in 2017—is abolished. Ruth Curtis, chief executive of the Resolution Foundation, emphasized the need for Reeves to address three critical areas: easing cost of living pressures, smart tax reforms, and repairing public finances.
“The Chancellor was front-footed – and front-loaded – on cost of living support,” Curtis stated in an interview on BBC Radio 4. “However, sticking to her manifesto tax pledge has cost millions of low-to-middle earners, who would have benefited from tax rate increases instead of threshold freezes.”
The analysis also indicates significant spending cuts ahead, with departments like the Home Office and Ministry of Justice poised to face the harshest impacts. Cumulatively, £6.4 billion in cuts are expected, representing 88% of the average annual reductions seen during the austerity period.
Moreover, nearly three-quarters of the £77 billion in additional taxation over the next five years will occur after April 2029, with a staggering £26 billion expected in that year alone. Curtis highlighted that the pain from this budget will primarily be felt in 2028 when various tax measures take effect.
Despite these forecasts, the Chancellor’s strategy also includes plans to boost public finances, although debt is projected to rise sharply. Curtis cautioned that while Reeves has made efforts to repair fiscal conditions, “appearances can be deceiving” as significant borrowing is anticipated through 2031.
As this situation unfolds, all eyes will be on how the government addresses the pressing need for growth. With living standards downgraded by the Office for Budget Responsibility (OBR), the urgency for effective policy changes has never been more critical.
Stay tuned for the latest developments as the economic landscape shifts rapidly following these Budget announcements.
