Households are facing tough times after the recent Budget announcement. Helen Miller, head of the Institute for Fiscal Studies (IFS), describes the situation as “truly dismal.” She points out that average disposable incomes—what people earn after taxes—are set to rise by only 0.5% each year over the next five years. This is a stark contrast to past decades when incomes grew by over 2% annually.
Miller attributes this sluggish growth to a proposed rise in National Insurance and freezing tax thresholds. According to her, these changes break Labour’s promise to avoid increasing taxes on working people. Despite these concerns, Prime Minister Rachel Reeves insists that Labour has kept many of its commitments.
The IFS forecast reveals that disposable incomes will increase by nearly £104 annually for the next four years—still not enough to counter rising living costs. Before the Budget, the UK faced slow economic growth, stagnant living standards, and multiple fiscal challenges. These issues, Miller argues, remain unresolved even after the Budget announcement.
Interestingly, the Resolution Foundation warns that the growth in living standards during this parliament could be among the worst on record. This fits a broader trend where many feel the pinch of economic pressures, with user reactions on social media citing frustration over rising costs and flat incomes. Some tweets hint at a growing sense of disconnection between government policies and everyday realities.
Ahead of last year’s election, Labour promised not to raise taxes on working people, covering National Insurance, Income Tax, and VAT. Reeves, however, argues that everyone needs to contribute fairly. She believes this is vital to tackle critical issues like NHS waiting lists and child poverty.
In the Budget, Reeves made moves to freeze income tax thresholds for three more years. She also introduced a £2,000 cap on pension contributions starting in 2029. Other measures included freezing NHS prescription charges and regulating rail fares in England while removing additional energy bill levies.
Despite some controversial decisions, Reeves maintains these choices are fair and necessary. Financial analysts had predicted uncertainty leading up to the Budget, given the government’s challenges in meeting fiscal rules. Miller notes that the Office for Budget Responsibility’s projections didn’t show significant changes, indicating no urgent need for a major financial overhaul.
Ultimately, while Reeves’ Budget introduced some measures aimed at easing living costs, analysts like Miller believe more needs to be done to spur economic growth. There’s a growing expectation that government initiatives should drive real, tangible improvements—not just attempts at managing existing problems.
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