Working-age families with lower incomes saw the most significant benefits from Rachel Reeves’ recent Budget, according to a new analysis. On the other hand, affluent retirees were the most negatively impacted by the measures. Economists at the Resolution Foundation revealed that the least affluent families could see an average increase of £90 annually, while wealthier individuals might face losses of up to £1,000. However, less wealthy pensioners could face a decrease of around £220, while wealthier retirees might experience a reduction of £680 under the new policies.
The analysis highlighted that the decision not to raise income tax by 1p, as previously suggested, could lead to lower-income earners, earning less than £35,000, being worse off. Experts noted that Reeves’ focus on addressing the cost of living issues postponed the implementation of tax reforms, anticipating a challenging period ahead.
A rapid study outlined in The Mirror indicated that the introduction of a mansion tax and the removal of the limit on child benefits had resonated positively with voters. However, criticism arose over the freezing of income tax thresholds, potentially resulting in higher taxes as incomes rise. The Resolution Foundation’s analysis indicated that nearly all earners outside the top 10% would be negatively affected due to this freeze rather than an increase in the income tax rate.
Moreover, the study found that a significant portion of families benefiting from the removal of the two-child benefit limit included at least one employed individual. Approximately 560,000 families are expected to gain an average of £5,310 in 2029-30 due to the removal of this cap, established by the Tories in 2017.
Ruth Curtice, CEO of the Resolution Foundation, emphasized the importance of Reeves’ Budget in alleviating the cost of living pressures, implementing smart tax reforms, and addressing fiscal concerns. However, challenges remain, particularly in terms of boosting economic growth and living standards, as highlighted by the Office for Budget Responsibility (OBR) projections.
The analysis also indicated a future increase in debt by 2031, emphasizing the need for further steps to restore public finances. The potential impact of departmental spending cuts and increased taxation in the coming years was also highlighted, indicating a complex economic landscape ahead. Overall, the response to Reeves’ Budget, particularly the measures related to taxes and benefits, received a mixed reaction from voters, with varying opinions on the potential implications for different segments of society.
