Only Benefit Families Set to Gain Under Labour as Middle Incomes Face Years of Decline
A stark analysis from a leading think-tank has exposed the grim reality behind Chancellor Rachel Reeves' claims of economic improvement, revealing that only families on benefits are likely to see gains under Labour's governance, while middle-income households are on track to become poorer for years to come.
Bleak Outlook for Household Incomes
In its detailed examination of the Spring Statement, the Resolution Foundation highlighted that most of the boost to real household disposable incomes has already occurred, painting a bleak picture for the remainder of the Parliament. The think-tank's own calculations, which exclude pensioners, indicate that lower-income households are projected to experience a 3.9 per cent increase in living standards, equivalent to £800, between 2025-26 and 2026-27. This improvement is primarily driven by the abolition of the two-child benefit cap and an above-inflation rise in the basic rate of Universal Credit.
However, families with typical incomes will see only a modest £300 boost over the same period, and those in the better-off half of the distribution will witness no improvement at all. Alarmingly, everyone is expected to see their disposable income decline over the rest of the Parliament, with households earning above-average incomes projected to be worse off in 2028-29 than they were when Labour first came to power.
Second-Worst Performance on Record
The Resolution Foundation pointed out that the 0.6 per cent improvement in real household disposable income over five years, which Ms Reeves has touted, would still rank as the second-worst performance on record. This dismal outlook is further threatened by the escalating Middle East crisis, which has already caused oil and gas prices to spike, potentially exacerbating economic pressures.
Ruth Curtice, chief executive of the Resolution Foundation, warned that sustained rises in oil and gas prices could add around a percentage point to inflation and increase typical annual energy bills by £500. She emphasised that this would disproportionately impact poorer families, as they spend more than twice as much of their budgets on energy compared to richer households.
Child Poverty Concerns Loom Large
The think-tank also highlighted another significant challenge for Labour: child poverty. While scrapping the two-child benefits cap has led to a substantial reduction in child poverty levels, it is predicted to rise over the next three years. The Foundation's forecasts show a significant fall of 3 percentage points, or 480,000 children, in 2026-27, followed by a steady increase in the subsequent years. Over the entire Parliament from 2024-25 to 2029-30, child poverty is set to decline only marginally by 0.5 percentage points.
Ms Curtice added that the near-term outlook for living standards appears positive, but the situation deteriorates sharply thereafter. The Foundation projects that after next year, the incomes of typical working-age families are expected to fall by 0.5 per cent, or £150, during the remaining two years of the Parliament from 2026-27 to 2028-29. This projection is based on the Office for Budget Responsibility's forecast for wages, which anticipates growth of just 1.4 per cent over the next three years, though separate estimates from the Bank of England suggest higher figures that could alter the balance on real household disposable income.
Overall, the analysis underscores a widening disparity in economic fortunes under Labour, with benefit-dependent families emerging as the sole winners while middle and higher earners brace for prolonged financial strain.
