Lalitha Try

Rachel Reeves to lift two-child benefit cap in November budget Exclusive: Officials exploring options to change rule that affected 1.7 million children in Great Britain last year

Very encouraging to read that the Government is preparing to lift the two-child limit as part of its child poverty strategy, but it is disheartening that options short of scrapping it entirely are still being considered. Thread on why this would be the wrong choice for an ambitious strategy:

Chart showing - Number of young people who are NEET, by age and benefit receipt: UK, 2025

Good news that the Govt will offer more support to young people who are out of work.

But while there are almost a million NEET young people, the support announced today (focusing just on 18-21-year-olds who are long-term unemployed and claiming UC) will reach less than 5% of this group...

Amid reports that MPs and an advisory taskforce will recommend scrapping the two-child limit on benefits, it's worth noting that this step would be the most targeted and cost-effective way for the Government to meet its aim of reducing child poverty ⤵️

The bare necessities • Resolution Foundation This briefing note examines how prices have changed over time in three key areas of spending: energy, food and transport. We also propose policy changes that can make essential costs more affordable f...

We wrote more about the rising cost of essentials, and how to help people cope with them here www.resolutionfoundation.org/publications...

Because poorer households were spending a higher proportion of their income on things like food and energy that saw larger price rises, they also faced higher rates of inflation than higher-income households did during the cost of living crisis.

Given that context, it’s not surprising to see that low-income households were spending a higher proportion of their consumption on essentials such as food and energy, with the poorest fifth spending double the proportion of their consumption on energy compared to the richest fifth.

The 2023-24 financial year was the second of the cost of living crisis, with inflation averaging 5.7% and the energy price cap peaking at over £2,000 in Q2 of 2023.

There’s some notable issues with the LCFS data: the response rate is only 28%, far below the pre-covid rate (and it was falling before covid too). The LCFS also undercounts consumption compared to the ONS’ National Accounts data – another source of consumption data, and this has worsened over time.

Some new ONS data came out on spending yesterday, covering the financial year 2023-24. What happened to spending that year, and can we trust the data? Quick thread:

In recent years, there has been a rapid accumulation of arrears on the biggest household bills. For example, total Council Tax arrears in England in 2024-25 stood at £6.7 billion in today’s prices, a 48 per cent real-terms increase since 2019-20

Council Tax arrears in England have risen by almost a half since before the pandemic.

Arrears continued to rise during the cost of living crisis - with £445 million added to England’s stock of arrears between 2023-24 and 2024-25. That's much greater than the rise seen after the financial crisis.

We're hiring for *three* roles in the RF research team, at a range of levels from entry to experienced. Deadline for all three is 19th September. More details in the link below 👇

The bare necessities • Resolution Foundation This briefing note examines how prices have changed over time in three key areas of spending: energy, food and transport. We also propose policy changes that can make essential costs more affordable f...

@simonpittaway.bsky.social and I have a report on the rising cost of essentials like food, and how best to support people with them. Making benefit uprating more timely and frequent would help low-income households be more resistant to higher prices. www.resolutionfoundation.org/publications...

Here's some info on today's inflation release from James and me. What is particularly concerning from this data is that last month, food inflation rose to almost 5% - which is especially bad for low-income households, who spend a high proportion of their total spending on food.

The bare necessities - Resolve Poverty Rising energy prices have led to families having their finances squeezed as more of their budgets are spent on essentials.

Rising energy prices have led to lower-income families having their finances squeezed as more of their budgets are spent on essentials.

@lalithatry.bsky.social of @resfoundation.bsky.social shares findings from a recent report on the cost of essentials 👇

resolvepoverty.org/the-bare-necessities/

The bare necessities • Resolution Foundation This briefing note examines how prices have changed over time in three key areas of spending: energy, food and transport. We also propose policy changes that can make essential costs more affordable f...

P.S. if you are interested in how the cost of essentials have changed over time, and how the Government can help people with the cost of living, especially energy, transport and food costs, see this recent report from @simonpittaway.bsky.social and me www.resolutionfoundation.org/publications...

Looking ahead, inflation is expected fall gradually from next year onwards. But we’ll get a new Bank of England forecast for inflation next month, along with another decision on interest rates.

Looking ahead to July’s inflation data, the energy price cap fell by 7 per cent in Q3. However, we wouldn’t expect that to have a big impact on household bills, as less energy is consumed during Q3 than in other parts of the year, especially winter.

Rising energy costs have left more people in underheated homes: one-in-five people (21 per cent) in low-to-middle income non-pensioner households were unable to keep their accommodation warm enough in 2022-23.

Energy prices rose significantly during the cost of living crisis but gas and electricity prices had been rising significantly before that: rising by 150 per cent in real-terms between 2000 and 2019.

Energy prices have been particularly weighing down on household incomes and consumption in recent years: in 2022-23, low-to-middle income households spent 11 per cent of their total non-housing consumption on energy.

Although inflation isn’t as high as it was during the peak of the cost of living crisis, prices are still high and rising faster than the inflation target. Since July 2021, prices overall are up 25%, energy prices are up 63%, and food is up 37%.

Services inflation, the BoE’s key measure of domestic inflationary pressure, actually remained unchanged compared to May’s data, at 4.7%. But given in May, the BoE forecast it would fall to 4.6%, it’s still a bit higher than expected.

In less than ideal news, core inflation has risen to 3.7% - up from 3.5% in May.

So why is inflation at 3.6%? This chart shows contributions to annual inflation is coming to a large extent from energy costs, as the price cap was higher in Q2 of 2025 than in Q2 2024.

Petrol prices have ticked up a bit in recent weeks, on account of the recent large rise in oil prices.

Transport is the main area pushing up on the headline rate of inflation, following on high oil prices last month. Restaurants and hotels, and housing and bills are pushing down on inflation, but not enough to counteract upwards contributions.

Surprise ONS inflation data today, showing that CPI inflation rose to 3.6% in June from 3.4% in May, 0.2ppts higher than forecast by the BoE. Here's a thread on what is driving this:

Chart showing: Changes to welfare spending announced in the Spring Statement or Pathways to Work Green Paper, at the time of announcement (left) and after the UC-PIP bill (right): UK, 2029-30

Expectations vs reality

The bare necessities • Resolution Foundation This briefing note examines how prices have changed over time in three key areas of spending: energy, food and transport. We also propose policy changes that can make essential costs more affordable f...

You can find the whole report here: www.resolutionfoundation.org/publications...

⬆️ We also need to improve how we uprate benefits, to better protect low-income families. When prices are high, benefits should be uprated twice a year, and more timely inflation data should be used for uprating, which is especially helpful when inflation is volatile.