Alex Clegg

Stairway to headroom • Resolution Foundation The Chancellor’s second tax-rising budget arrived under dark clouds, but forecasts came in better than feared. But even though she was saved from the worst predictions of past weeks, the Chancellor st...

See (much much) more analysis in our overnight report! www.resolutionfoundation.org/publications...

Nevertheless, the Chancellor managed at this Budget to expand her fiscal headroom in a way that was progressive and boosted incomes for the poorest households. The announcement on the two-child limit in particular was extremely welcome.

And despite the giveaways and U-turns, the outcome of the miserable productivity outlook and tax rises is continuing stagnation in overall living standards. Real Household Disposable Income growth across this Parliament is expected to be the second worst on record, beating only the last one

It is not clear where the Chancellor might look if further tightening is needed - a real possibility given rising unemployment and a weak outlook for productivity. A more consistent set of priorities would be welcome.

This points to a deeper confusion over who should bear the pain of fiscal consolidation. In Spring, the Chancellor's answer was disabled people; yesterday she asked everyone to pay a little more but especially richer households

This picture is different from what it looked like after the Spring Statement, when the cumulative impacts of this Government's announcements were regressive overall. The change is driven by the 2-child limit repeal and the backtrack on planned cuts to PIP and UC-Health bsky.app/profile/alex...

Zooming out, yesterday's announcements mean the distributional impact of all policies announced by this Government is now progressive: the bottom half lose 0.1% of the household income on average by 2029-30 from this Government's changes, compared to 1.4% for the top half

Benefit changes since Autumn Budget 24 outweigh tax rises for half of households in the bottom half of the distribution, and two-thirds of the poorest decile. In contrast, 4/5 households in the top half, and almost all households in the richest decile will find themselves worse off overall

How has the Budget impacted living standards? The distributional impact of all tax/benefit changes since Autumn Budget 2024 is progressive:poorer households gain from 2-child limit repeal and UC boost, while richer households lose from threshold freezes and new property, dividend and savings taxes

Not well understood that 6 in 10 families impacted by the two-child limit are in work, and that the vast majority have 3 or 4 children.

Live posting about the speech feels slightly unnecessary when all the details are out. But I'm a sucker for tradition nonetheless.

Big news on Fuel Duty - the 5p cut will be removed gradually from September. A good way to end this giveaway without pushing up inflation

Scrapping the two-child limit in full is a monumental decision. Well done to all involved in the Child Poverty Strategy, and everyone who has made the case against the policy.

OBR says scrapping costs £3 billion in 2029-30 and will lift 450,000 out of poverty

Is runaway welfare spending to blame for the Chancellor's fiscal challenges?

Hear from @alexclegg.bsky.social on why any claims that the Chancellor could avoid raising in the Budget could by cutting welfare should be scrutinised.

Is welfare spending ‘out of control’? • Resolution Foundation The run up to this Budget has seen more than its fair share of rumours, leaks, briefings and counter-briefings. But if there’s one thing we know for sure, it is that tax rises are coming. The public f...

Inevitably, there are already arguments that the Chancellor should cut welfare spending instead of raising taxes tomorrow. But is welfare spending really 'out of control'?

Here's the facts:
www.resolutionfoundation.org/comment/is-w...

But for entitlement-based support like Council Tax Reduction, localisation is unlikely to improve on a centrally-designed scheme and can lead to unfairness, inefficiency and arbitrary hardship.

The Government should also be clear that discretionary crisis support cannot be expected to fully make up for shortfalls in support in the UK-wide, entitlement-based social security system

Overall, social security support can benefit from localisation but it should only be done when the advantages of local delivery are clear and realizable. For discretionary support, this means protected funding and clear but not constraining guidance from central government.

This would bring CTR in England in line with the schemes in Scotland and Wales, would close one of the gaps in available support that has opened up as a result of country-level devolution, and make Council Tax Reduction equitable across Great Britain and between working- and pension-age families.

We estimate that centralising CTR under the current default scheme, which mirrors the old Council Tax Benefit and covers up to 100 per cent of Council Tax liability, would cost around £400 million in higher support in 2029-30 compared to the current funding model

We recommend that the design and funding of CTR in England is returned to central government. This would ensure the established design principles for entitlement-based support are consistent across the country, and avoid the inefficiency of requiring each local authority to design its own scheme.

(There is also a correlation between Conservative-control (vs control by other partes) and lower generosity, which could be seen as localisation working in that it reflects local democratic choices)

A regression analysis of CTR generosity found that low financial resilience and high deprivation in LAs were correlated with less generous schemes, suggesting design decisions are driven by financial pressures, and residents less likely to be able to pay Council Tax are required to pay more

This is inefficient, but at worst has led to legal challenges (see cases in Trafford, Sandwell and Croydon, where changes to schemes were found to be discriminatory against certain groups).

We argue more strongly that the localisation of Council Tax Reduction in England has been a failure. There are already well-established principles in the UK social security system for designing entitlement-based support, so the benefit of each local authority designing its own scheme is unclear

The more recent incarnations of discretionary support – such as HSF – have protected funding, but evaluation of their effectiveness is difficult given a lack of data on how support is allocated and little published information about local authorities’ internal policies and decision-making practices

This has been a particular feature of the localisation era in England, which occurred alongside a significant squeeze in local authority spending power, meaning local authority decisions around providing localised support were often reduced to where and how much to cut

In practice, local authorities’ lack of control over their revenue streams and overall expenditure, plus cuts to their funding from the UK government, means they are under considerable pressure to cut spending where funding is not ring-fenced

But it can be inefficient if it results in LAs duplicating efforts in design and administration and having many schemes can lead to confusion. There is also an inevitable trade-off between locally-tailored support and the concept of equity of support for people in similar circumstances.

Arguments for: it allows the design of programmes to benefit from the knowledge and expertise of local decision makers; it gives LAs a direct financial stake in their residents’ circumstances; and it permits local residents to express their preferences for social security through the ballot box