Election 2024: Poorest fifth of working-age households have lost more than 14 per cent of their income since 2010 while pensioners have gained by £800 per year

New research from the Resolution Foundation warns that the next government will need to consider how best to strengthen the social security system if it is to prevent rising hardship and enable all households to share in future economic growth

The poorest fifth of working-age households have lost more than 14 per cent of their income since 2010 while pensioners have gained by £800 per year, according to the Resolution Foundation.

In Ratchets, retrenchment and reform: The social security system since 2010, the Resolution Foundation highlights that although overall social security spending has been relatively stable over the last 14 years, working-age benefits have been frozen or increased below inflation for half of them, while pension uprating has been 'robust', protected by the triple lock. In particular, it points out that the real value of the state pension rose by 16 per cent over the period, while the real value of average earnings grew by just 2 per cent.

Examining the changes since 2010 in more detail, the Resolution Foundation separates them into three distinct periods -

• 2010 to 2015 - cuts to non-pensioner support hit families across the income distribution relatively evenly, with the introduction of means-testing of child benefit and the narrowing of child tax credit eligibility hitting higher- and middle-income families, while cuts to housing support, the introduction of the benefit cap and below-inflation uprating impacted poorer families;
• 2015 to 2019 - freezes to most non-pensioner benefits hit households in the bottom fifth of the income distribution hardest; and
• 2019 to 2024 - the rollout of universal credit and further boosts in support for low-income workers have raised average incomes for many low-income households in work, although not by enough to offset the previous cuts.

As a result of the changes, while pensioner households have gained £800 per year, out-of-work households, lone parents and larger families have been the biggest losers -

• working-age households in receipt of benefits have lost £1,500 per year;
• out-of-work households have lost £2,200 per year;
• lone parents receiving benefits have lost £2,600 per year; and
• households on benefits with three or more children have lost an average of £4,600.

Looking to the future, the Resolution Foundation points to two upward pressures on social security expenditure - spending on the state pension due to its increased value and rising number of pensioners, and spending on non-pensioner disability and incapacity benefits with the number of claimants forecast to continue its upward trend.

However, while support for housing, children, non-disabled working-age adults, and health-related and means-tested support for pensioners is expected to remain broadly flat in real terms in the next five years, the Resolution Foundation warns that -

'... the assumptions underpinning these forecasts require the next government to accept some very challenging outcomes which may simply prove not to be sustainable as the next parliament unfolds.'

As a result, the Resolution Foundation says -

'The next government will inherit a social security system that has been substantially reformed and modernised over the past 14 years, but also one that has tilted spending from working-age families towards pensioners; that has seen benefits fall in real terms (although not due to decisions made by the most recent government); and has broken the link between entitlement and need for some of the most vulnerable households. The next government may not need to undertake structural reforms of the sort seen in the 2010s. But it will need to consider how best to strengthen the social security system if it is to prevent rising hardship and enable all households to share in future economic growth.'

For more information, see Ratchets, retrenchment and reform: The social security system since 2010 from resolutionfoundation.org

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