Poorer working-age families emerged as the primary beneficiaries of Rachel Reeves’ recent budget, with affluent pensioners facing the most significant impact, according to an overnight analysis.
The Resolution Foundation’s economists revealed that the least affluent households saw an average increase of £90 annually, while the wealthiest half are set to lose approximately £1,000. Conversely, less affluent pensioners experienced an average loss of £220, while wealthier retirees are expected to be £680 worse off under Reeves’ policies.
Analysis indicated that the decision not to raise income tax by 1p, as previously suggested, would disadvantage individuals earning less than £35,000. The focus of the budget was on addressing the cost of living, with tax reforms being postponed to navigate the challenges anticipated in the coming years.
A rapid survey highlighted positive reception among voters for measures such as the mansion tax and the removal of the two-child benefit limit. The freeze on income tax thresholds drew criticism, as it would lead to increased tax payments as incomes rise, affecting all but the top 10% of earners.
The Resolution Foundation’s research revealed that a significant portion of families benefiting from the removal of the two-child benefit limit have at least one working member. Approximately 560,000 families are poised to gain an average of £5,310 in the 2029-30 fiscal year due to the elimination of the cap introduced by the Conservatives in 2017.
Ruth Curtice, the Foundation’s chief executive, remarked that the budget aimed to address cost of living challenges, implement sensible tax reforms, and enhance the fiscal position. However, the decision to maintain tax thresholds instead of increasing rates adversely affected low to middle-income earners.
The analysis forecasted future austerity measures affecting departments like the Home Office, Ministry of Justice, and local government. It outlined substantial budget cuts and highlighted a significant increase in tax revenue, with a large portion expected post-April 2029.
Debt levels are projected to rise by 2031, despite efforts to bolster fiscal discipline. The budget was commended for addressing immediate concerns but cautioned that sustained economic growth was crucial for long-term stability and prosperity.
Public sentiment, as reflected in a study by 38 Degrees and JL Partners, demonstrated support for measures such as the mansion tax and the removal of the two-child benefit limit. The initiatives were praised for their potential to positively impact families and rebalance societal inequalities.
Matthew McGregor, CEO of 38 Degrees, emphasized the public’s desire for impactful change that improves their quality of life and places trust in essential services like the NHS. The positive response to the budget signaled a demand for transformative policies that enhance fairness and social welfare.
Tom Lubbock, co-founder of JL Partners, noted the favorable reception of the mansion tax and the elimination of the two-child benefit limit among the public, suggesting that the budget measures resonated well with voters.