At Wednesday’s Spring Statement, Chancellor Rachel Reeves said that forecasts showed that households would be “on average over £500 a year better off under this Labour government.”
The figures come from new projections produced by the fiscal watchdog, the Office for Budget Responsibility.
But how were the numbers calculated, and which households are likely to be the biggest winners and losers from the changes? The i Paper takes a look, below.
The figures come from calculations produced by the Office for Budget Responsibility (OBR), which is forecasting that households will be £500 per year better off in 2029/30 than it was forecasting at the time of the last Budget.
It says the outlook is higher compared to last October due to higher wage growth forecasts.
Across 2025, average nominal wage growth is 0.7 percentage points higher than the October forecast.
Its latest outlook says: “We expect real household disposable income (RHDI) per person to grow at an average of around 0.5 per cent a year in the five years from 2025/26 to 2029/30.”
But at the same time, it points out that this growth is very uneven over the next five years.
“Growth is projected to vary significantly around this average, first slowingsharply from 2.5 per cent in 2024/25 to almost no growth in 2027/28,” it says.
The reason growth is so slow during this period is a combination of low wage rises – partly due to National Insurance rises announced last October, the cuts to benefits announced on Wednesday, and the freeze on income tax thresholds that is expected to run until 2028.
Growth picks up after 2028 because income tax thresholds are set to rise with inflation once again.
Martin Lewis, founder of consumer website MoneySavingExpert.com, wrote on social media: “Most of [the increase] comes in the last two years, after drops first, and is based on assumptions that some of current tax proposals, such as freezing tax thresholds will end.”
Separate figures from the Resolution Foundation say that overall, real household disposable income is forecast to rise by just £1,200 over the course of the entire 2020s, down from £2,900 over the 2010s, and £4,800 in the decade running up to the financial crisis (1997 to 2007).
Who are the winners and losers?
Given that wage growth is set to be the biggest driver of disposable income growth – the amount people have to spend – and benefits are set to be cut, some experts believe that richer households will be the biggest winners from the changes.
Low-income households will not see much of the benefit, they have said.
Arnab Bhattacharjee, research lead for regional modelling and microsimulation at the National Institute of Economic and Social Research, said: “The Chancellor claimed working households will be better off by about £500 on average in 2025/26.
“Recent wage increases have largely loaded on to the top three-tenth of the income distribution, leaving working households in the bottom half of the population significantly worse off compared with affluent households.
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“With no substantial initiatives targeting low-income households, the living standards and living conditions of the working poor will continue to stagnate.”
Other economists suggested similar.
Edward Jones, professor of economics at the University of Bangor, said: “I suspect it won’t be evenly distributed and I fear that those who really need the help won’t get to benefit from being £500 better off.
“And people won’t see this anytime soon. Those on low incomes are unlikely to feel better off for some time as businesses will want to rebuild their profit margins.”
The Government’s own analysis even suggests that benefits cuts will see an extra 250,000 people – including 50,000 children – pushed into relative poverty.
The analysis, published on Wednesday, said: “Around 730,000 future recipients of universal credit health will lose on average £3,000 a year by no longer being able to claim the benefit.
“Almost 4 million households on universal credit, who do not receive the health element, will gain an average of £265 a year.”
The Resolution Foundation think tank said 68 per cent of the welfare cuts announced on Wednesday were are concentrated among households in the bottom half of the income distribution.
Ruth Curtice, chief executive at the Resolution Foundation, said: “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.”
Other campaigners agreed that those affected by welfare cuts will be affected most harshly.
Dame Clare Moriarty, Chief Executive of Citizens Advice, said: “This government says it wants to drive up living standards and fight child poverty, but you can’t do that while taking a wrecking ball to the support people rely on.
“We know people are already struggling. Many really are facing an impossible choice between basic needs, like heating or eating. This is even worse than we were expecting and just piles on the pressure for those people already living on a financial knife edge.
“These looming benefit cuts will drive even more people into poverty, not lift them up. This isn’t just a spreadsheet. We’re talking about real lives, real people, real struggles.”
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