Revealed: Poorest get just £120 help in Spring Statement, while richest handed £480 boost

• Spring Statement policies are poorly targeted, helping richest households four times more than poorest, and leaving worst off with significant shortfall
• Alternative plan to raise social security benefits would support poorest better at similar cost

Economists at IPPR have revealed a major and continuing ‘shortfall’ in the household budgets of the UK’s poorest due to the cost of living crisis, despite measures announced today by the Chancellor in his Spring Statement.

The Chancellor set out to support families who face spiralling costs due to energy and other price rises expected to peak at 8.1 per cent later this year, mainly by lowering taxes.

IPPR analysis examined the ‘shortfall’ between the cost of living increase for families and the policies put in place to support them.

It found that prior to today’s Spring Statement, the poorest 20 per cent of households were facing their costs rising by an average of £550 this year. The measures announced today, including the National Insurance threshold change and fuel levy cut, would see these costs reduced by an average of only £120. This would still leave the majority of the UK’s poorest with no option but to miss out on essentials, such as food or home heating.

But the measures offer a more significant boost to the those who are already better off. The richest 20 per cent of households gain on average £480.

IPPR analysis shows that despite Sunak’s measures, a low income couple with one child would see an average shortfall of £670, a low income single person with one child would see an £341 shortfall on average and a low income couple with no children would see an average shortfall of £611.

FIGURE 1: Median cash shortfalls by example family type in poorest quintile

FIGURE 2: Median household budget shortfalls by income quintile

The think tank argues that Sunak could have offered a much greater helping hand to those on low incomes by making better policy choices. IPPR has called for a policy combining an increase in Universal Credit and legacy benefits of 8.1 per cent and a rise in child benefit by £10 per child per week. Such a package would cost just £1.5 billion more and would have kept the impact of the cost of living crisis on the poorest below £200.

Dr George Dibb, head of the IPPR Centre for Economic Justice, said:

“What we’ve seen today is quite incredible. As the country hurtles towards the biggest fall in living standards on record, the Chancellor stood at the despatch box and announced a policy package that doesn’t help the households who need the most support and which provides a big boost to the richest.”

“Our analysis shows that households in the poorest 20 per cent will still be left with no option, but to miss out on household essentials. Some of the poorest families will still be left with a £700 shortfall even after the Chancellor’s announcement.

“Today’s statement was a missed opportunity to provide a lifeboat for people’s standard of living.”

ENDS

George Dibb, Carsten Jung and Henry Parkes are available for interview

CONTACT

David Wastell, Director of News and Communications: 07921 403651 d.wastell@ippr.org

Robin Harvey, Senior Digital and Media Officer: 07779 204798 r.harvey@ippr.org

NOTES TO EDITORS

1. Methodology: IPPR used the Living Cost and Food Survey to estimate household spending for different household types across the income distribution. From there we have applied an annual inflation rate of 7.6% to estimate additional weekly “spending pressure” for each household type (defined by household composition and income level). By this we mean the additional spending needed a household to “stand still” compared to last year.
   
   We have used the IPPR tax-benefit model with the Family Resources Survey to estimate weekly income growth expected in 2021/22 for different households, factoring in changes to National Insurance, average expected earnings growth and benefit uprating. We have also the factored in the council tax rebate, fuel duty cuts and the £200 fuel rebate loan. For simplicity, modelling assumes NICs cut from April and over-estimates the benefit to households.
   
2. IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence. www.ippr.org