250,000 more people will face relative poverty after Rachel Reeves’ benefits cuts, DWP says – spring statement live
250,000 more people, including 50,000 more children, will be pushed into relative poverty by benefit cuts, DWP says
The Department for Work and Pensions’ impact assessment of the health and disability benefit cuts also says that will put an extra 250,000 people, including 50,000 children, into relative poverty.
The potential impact of these reforms on poverty projections has been estimated using a static microsimulation model. Using this model, we estimate there will be an additional 250,000 people (including 50,000 children) in relative poverty after housing costs in 2029/30 as a result of modelled changes to social security, compared to the baseline projections.
Relative poverty is defined as having a household income below 60% of the median.
Key events
-
Resolution Foundation: Reeves wrong to balance books on the backs of low-income families
-
Green party says decision to opt for benefit cuts not wealth tax ‘morally repugnant’
-
Stride admits Tory economic policy review is ‘blank sheet of paper exercise’
-
ING: further tax rises in the autumn are becoming increasingly inevitable
-
Single women are biggest losers from disability benefit cuts, DWP figures show
-
OBR: UK on track to miss 1.5m new homes target
-
Tighter Pip eligibility rules will lead to 150,000 people losing carer’s allowance, DWP says
-
IFS: Reeves ‘risks losing the wood for the trees’ with fiscal tweaking
-
UK tax take heading for record high
-
250,000 more people, including 50,000 more children, will be pushed into relative poverty by benefit cuts, DWP says
-
DWP says disability benefit cuts will affect 3.2m current or future claimant families, with average loses of £1,720
-
OBR: Full-scale trade war would hurt growth
-
Mel Stride claims spring statement is ‘public humiliation’ for Reeves because fiscal targets were due to be missed
-
OBR: The economic and fiscal outlook has become more challenging
-
Reeves says OBR now expects people to be £500 per year better off at end of decade than forecast under Tories
-
The new growth forecasts
-
Reeves says OBR has raised its growth forecasts for years after 2025
-
Reeves says planning reforms will put government ‘withing touching distance’ of hitting 1.5m new homes target
-
Reeves says OBR calculates Labour’s planning reforms will boost GDP by 0.4% within 10 years
-
UK inflation seen at 3.2% this year
-
Reeves confirms OBR has cut growth forecast for 2025 from 2% to 1%
-
Reeves say day-to-day spending to rise by 1.2% a year above inflation, not 1.3% as previously planned
-
Reeves: Fiscal rule still being met in 2029-30
-
Reeves confirms ‘final adjustments’ have been made to plans for disability benefit cuts
-
Reeves says she will raise further £1bn by crackdown on tax avoidance and evasion
-
Reeves says spring statement cuts will restore £9.9bn budget surplus headroom by 2029/30
-
Reeves says world ‘is changing before our eyes’, and government must respond
-
Reeves delivers spring statement
-
Starmer suggests Lib Dem leader Ed Davey not being serious, after he calls for review of intelligence sharing with US
-
Starmer refuses to rule out digital services tax being watered down under pressure from Trump administration
-
Starmer says legal ban on mobile phones in schools ‘completely unnecessary’
-
Starmer faces Badenoch at PMQs
-
Scope criticises Reeves over ‘knee-jerk’ decision to deepen disability benefit cuts
-
Tories claim Reeves should use ’emergency budget’ to fix Labour’s mistakes
-
Kenny MacAskill elected leader of Alba party
-
Benefit cuts will lead to more deaths, experts say
-
Healey says Vance and Hegseth ‘have got a case’ on EU defence spending, when asked about ‘pathetic freeloader’ jibes
-
Reeves to announce extra £2.2bn in defence spending from April
-
UK inflation falls to 2.8% in boost for Rachel Reeves before spring statement
-
‘Must-do for any responsible government’ – minister defends surprise extra benefit cuts to feature in spring statement
Rachel Reeves will be holding a press conference, but it is now due to start at 4.45pm, we’ve been told.
Resolution Foundation: Reeves wrong to balance books on the backs of low-income families
The Resolution Foundation have declared that Rachel Reeves is wrong to balance the books on the backs of low-income families.
They fear that the “rushed welfare changes” will leave 3.2 million families £1,700 worse off on average, and risk causing “significant damage” to many families’ living standards.
They argue that the chancellor did not need to concentrate the pain on welface cuts. Extending the freeze in personal tax thresholds by just a single year would have saved almost as much (£3.9bn in 2029-30) and would have been shared far more widely across 24 million households, they say.
Ruth Curtice, chief executive at the Resolution Foundation, warns that the living standards pain this decade could be even worse than in the 2010s:
“Having set her new fiscal rules only last autumn, and faced with rising debt interest costs and a weaker outlook for the public finances, Rachel Reeves had little choice but to make a downbeat Spring Statement.
“But while the Chancellor was right to balance the books, she was wrong to do so on the backs of low-to-middle income families, on whom two-thirds of the welfare cuts will fall. Over three million households will be worse off as a result of welfare changes.
“Major cuts to Universal Credit were made so late in the day that the OBR was unable to assess them, suggesting that long-term change is playing second fiddle to short-term savings. This approach to welfare reform that rarely ends well for individuals or the Government.
“The £3.6 billion trimming of departmental spending is a far cry from the austerity of the 2010s. But it is not pain-free either – crucial public services like courts, prisons and local government will feel the strain of reduced funding in the second half of this Parliament.
“The Government’s welcome ambition to kickstart growth got closer to reality today, with planning reforms set to boost GDP in the coming years. But the outlook still looks bleak. Much has been made of the living standards pain Britain experienced during the 2010s, but the 2020s are still on track to be even worse.”
[Resolution Foundation’s focus is on improving living standards for those on low-to-middle incomes]
Green party says decision to opt for benefit cuts not wealth tax ‘morally repugnant’
Here is some more political reaction to the spring statement.
This is from Adrian Ramsay, co-leader of the Green party
The chancellor had a choice today. To rebalance our economy by asking the very wealthiest to contribute more, or to remove vital support from ill and disabled people. That she chose to take from the most vulnerable to balance her books is a damning reflection of how out of touch this government is. It is morally repugnant.
And it’s not just ill and disabled people who will suffer as the chancellor doubles down on cuts to frontline services. This will weaken our communities and leave us all poorer. Labour once claimed that they were for the many, not the few – it’s clear now that is this is no longer the case.
And this is from Richard Tice, the Reform UK deputy leader.
Quite simply, this emergency budget is a disaster and was entirely avoidable, yet Labour decided to plough regardless. The OBR has forecast that tax as a share of the economy will hit a historic high within three years and halved the revised growth forecast for 2025 from 2% in the autumn to 1% today.
Yet the OBR thinks that this government will somehow pluck growth out of thin air in the coming years. The OBR are delusional.
The economy is shrinking, growth is collapsing towards recession, energy bills soaring because of net zero, the cost of government borrowing soaring back to 15 year highs and the job market is collapsing. The reaction by the bond market should be a dire warning to us all.
Quite what Tice means by “reaction of the bond market” is not clear. As mentioned earlier, the bond market seems quite calm this afternoon. (See 2.30pm.)
The latest UK growth figures are even less impressive once you adjust for the rising UK population.
GDP per capita, which is often seen as a measure of a country’s standard of living, is only forecast to rise by a meagre 0.3% this year – weaker than the downgraded growth estimate of 1%.
Growth in GDP per capita picks up a little in future years, to 1.5% in 2026, 1.4% in 2027, 1.3% in 2028 and 1.4% in 2029. In each case, that’s slower than the headline growth forecast for the year.
Ben Harrison, director of the work foundation at Lancaster University, says:
“Against a backdrop of slashed growth forecasts, the OBR confirmed that real GDP per person is still below its 2022 level and will not recover until 2026.
Many workers across the country are still struggling to make ends meet, despite strong wage growth, and recent ONS research showed that 86% of people in the UK think that the cost of living is one of the most important issues facing the country.
Stride admits Tory economic policy review is ‘blank sheet of paper exercise’
Peter Walker
Peter Walker is a senior Guardian political correspondent.
The Conservatives’ approach to redefining their economic policy is “a blank sheet of paper exercise” with nothing yet ruled out, the shadow chancellor, Mel Stride, has told reporters after the spring statement.
At a press briefing in parliament, Stride also questioned whether Rachel Reeves had left herself enough fiscal headroom, and described the cuts to welfare and disability payments as “rushed” and “botched”.
The Tories have thus far announced few policies, which Stride described as being the luxury of being voted out of office and into opposition. In his brief, he said, the aim was to “get away from managerial incrementalism”, saying this had only brought sluggish growth.
Policies aimed at “rewiring the economy”, Stride said, would thus be wide-ranging, and would definitely include shrinking the state.
You need to look at skills and education and higher education, all those areas. You need to look at welfare … and then certainly supply side issues like planning and housing, and roads and rail and reservoirs and getting energy costs down. So there are many things that we’re going to have to think very deeply about.
On the welfare cuts, Stride, a former work and pensions secretary, said the government had taken the easy option of freezing benefits or squeezing access to them without fundamentally rethinking whether the payments worked for people.
As an example, he said, someone receiving Pip due to a long-term mental health challenge should be given help with this, and not simply a long-term payment without help.
He also said Rachel Reeves’ restoration of her £10bn fiscal headroom might not last till the autumn budget:
Given her track record and the way that she’s run the economy, I suspect that markets and others will look at that headroom and say to themselves that perhaps she should have built more in than she has.
Libby Brooks
Libby Brooks is the Guardian’s Scotland correspondent.
The Scottish government’s finance secretary, Shona Robison has accused Rachel Reeves of imposing “austerity cuts” on the most vulnerable, adding that increased national insurance costs would already “short-change Scotland’s public services …to the tune of hundreds of millions of pounds”. Robison said:
The UK government’s choice to increase defence investment is welcome, but its choices to shortchange public services and deliver austerity cuts to some of the most vulnerable are deplorable.
Stephen Boyd of the IPPR Scotland pointed out that welfare cuts – and the knock-on reduction in consequentials even where the benefit is devolved, as with Pip – would “only intensify” the fiscal challenges already facing the Scottish government, while STUC general secretary Roz Foyer blasted Reeves for not rewriting her “self-imposed and self-defeating” fiscal rules. She said:
She could have increased taxes on corporations or the wealthy. She could have delayed decisions till the autumn budget. Instead, she has rushed through deeply damaging cuts to support for disabled people.
The fact that the Government is now freezing some benefits that they appeared to rule out only last week, show that this is policy on the hoof, and it is our most vulnerable who are bearing the brunt.
ING: further tax rises in the autumn are becoming increasingly inevitable
Dutch bank ING has predicted that further UK tax rises in the autumn are becoming increasingly inevitable, unless there is more good news on growth before the next budget.
ING predict that today’s upgrade to Britain’s medium-term growth forecasts “may not stick for long”. If those forecasts are cut, then Reeves’s headroom on delivering a budget surplus at the end of the decade would be wiped out.
In a note to clients, James Smith, ING’s developed markets economist, explains:
The OBR is still relatively optimistic about productivity growth, despite output per hour actually falling repeatedly over the past year or two. At some point, the OBR is probably going to have to throw in the towel and cut back its forecasts. And if it does this at the Autumn Budget, that will further reduce the money available under the fiscal rules. Bear in mind that the current level of “headroom” – £9.9bn – is a rounding error in the context of the UK’s public finances.
The UK’s public finances are operating on increasingly fine margins, and we don’t think that defence will be the only department requiring fresh cash injections over the coming years. At the Autumn Budget, that may leave the Treasury with little choice but to boost government spending plans even further.
In the absence of further upgrades to GDP growth, or a fall in gilt yields (not our base case), we think this is likely to necessitate further tax hikes.
Carers UK, a charity for carers, has said that the news that 150,000 carers will lose the carer’s allowance (see 2.22pm) will cause “huge anxiety”. Helen Walker, its chief executive, says:
Today’s spring statement confirms that the government’s welfare reform plans will include the first substantial cuts to carer’s allowance in decades, realising many carers’ worst fears. This is an unprecedented step in the wrong direction and must be swiftly rectified.
Carers save the UK economy an estimated £184bn a year, but now many more are in danger of further financial hardship and poverty. They deserve so much more. The repercussions of today’s changes will be felt deeply by those who for too long, have been our last line of defence – providing vital support which simply can’t be found elsewhere.
The Treasury is going to raise significantly more from inheritance tax by the end of the decade, partly because of rising property prices and partly because of government policies, the Office for Budget Responsibility says in its report. It explains:
Inheritance tax (IHT) receipts are forecast to raise £8.4bn in 2024-25, a 11.6% increase on 2023-24 largely driven by higher asset prices in the second half of 2024, combined with frozen tax-free thresholds. Receipts are then forecast to rise to £14.3bn in 2029-30, with around £2.5bn of the rise in 2029-30 due to the policies announced in October 2024.
