Chancellor Rachel Reeves claimed in her spring statement this week that households would be better off by £1,000 by the end of parliament.
FactCheck takes a look.
What did Rachel Reeves say about households saving £1,000?
The chancellor said in the Commons that “by the next election, after accounting for inflation, people are forecast to be £1,000 a year better off per year”.
This was based on the ONS’ real household disposable income (RHDI) figures per person – in other words, the money left over after taxes and adjusting for inflation.
The Treasury told us that it worked out its figure by subtracting the forecast RHDI per capita in 2024 (£25,600) from the 2029 figure (£26,685). This worked out as £1,085.
The Institute for Financial Studies (IFS) – an independent economic think tank – told FactCheck that its own approximation of the government’s calculation “does work out at around £1,000 higher annual income by the end”.
However, the Joseph Roundtree Foundation (JRF) – a charity aimed at solving poverty – argues that, in reality, the figure will be much lower.
New modelling from the charity said that average annual household disposable incomes are projected to grow by just £40 over the course of the current parliament (from April 2024 to April 2029), after adjusting for inflation.
The Foundation said its figures “differ” from the £1,000 increase as quoted by Ms Reeves yesterday, as they are modelled on a household basis and “take into account actual housing costs”, which it says offers a more accurate reflection.
The modelling uses the most up to date forecasts from the OBR on key economic indicators, such as Consumer Price Index inflation and average weekly earnings, which are then fed into the IPPR (Institute for Public Policy Research) Tax Benefit Model, using the Family Resources Survey to project household incomes for each of the next five years.
Though it’s worth noting that the latest OBR forecasts don’t take into account the current conflict in the Middle East, or the potential impact this could have on the economy.
This means that if the conflict in the Middle East carries on, the JRF projections for disposable income may change.
Chris Belfield, Chief Economist at the Joseph Rowntree Foundation, said: “The government needs to focus on driving up living standards so families can feel the change day to day. This needs action across all aspects of government to bring down people’s costs and boost their incomes.”
A Treasury spokesperson told FactCheck: “Households are set to be £1,000 a year better off as inflation falls and living standards rise.
“This government has the right economic plan, cutting the cost of living, cutting debt and growing the economy. We’re cutting the cost of living with £150 off energy bills, boosting the minimum wage for millions of workers, expanding free childcare, binning the two-child limit and saving families over £1,300 on a typical new fixed-rate mortgage as interest rates continue to fall.”
FactCheck verdict
The chancellor’s figure of families being better off by £1,000 by the end of parliament (2029) makes sense if it’s looked at in terms of disposable income.
However, if housing costs – or other factors such as unprecedented conflicts – are taken into account, then this amount would be much smaller.
