Chancellor Rachel Reeves' first Budget has created clear winners and losers, with low-income working families gaining modestly while wealthier pensioners face significant financial losses, according to a major new analysis.
Who Benefits and Who Loses Out?
Overnight research from the respected Resolution Foundation think-tank reveals the starkly different impacts of the Chancellor's measures. The analysis found that the poorest families in Britain will be approximately £90 a year better off on average as a result of the Budget announcements.
However, the picture is dramatically different for the wealthiest half of the population, who are set to lose around £1,000 per year. The hardest hit group identified in the study are wealthy pensioners, who will be £680 worse off annually under the new measures. Even poorer pensioners are not spared, facing an average loss of £220 per year.
The Tax Threshold Controversy
The analysis uncovered a surprising consequence of the Chancellor's decision to freeze income tax thresholds rather than increase income tax rates by 1p, as had been speculated before the Budget. Economists found that this choice means people earning less than £35,000 will actually be worse off than if tax rates had risen instead.
Ms Reeves has faced criticism for the threshold freeze, which means that as wages increase over time, more people will be pulled into higher tax brackets. The Resolution Foundation calculated that all but the top 10% of highest earners are financially worse off because of the threshold freeze compared to a straightforward tax rate increase.
Broader Budget Impacts and Future Cuts
Despite some negative impacts, the Budget does deliver significant benefits to certain groups. The research found that 560,000 families will gain an average of £5,310 in 2029-30 from changes to the two-child benefit limit, with three in five of these families including at least one working adult.
Additional support includes typical energy bills being cut by approximately £130 annually for the next three years, though this support is scheduled to fade away after that period.
Looking further ahead, the analysis identified pre-election austerity measures pencilled in for 2029-30. The Foundation warned that departments such as the Home Office and Ministry of Justice, along with local government, are likely to be hardest hit by spending cuts amounting to £6.4 billion.
Ruth Curtice, Chief Executive of the Resolution Foundation, commented on the broader fiscal picture: "The Chancellor was front-footed on cost of living support, but sticking to her manifesto tax pledge has cost millions of low-to-middle earners." She added that "debt is up and most of the fiscal repair job has been put on hold for three years," suggesting that further challenging budgets lie ahead unless economic growth improves.
