Pensioners and people on disability benefits are the winners from radical changes to the welfare system made by the Tories over the last decade, while working-age families are losing out by thousands of pounds every year, according to a report by the Resolution Foundation.
The Conservatives’ 14-year overhaul of social security has shifted spending away from children and housing to supporting elderly people, and broken the link between entitlement and need for some of the poorest households in the country, the report says.
The size of the welfare state has increased slightly, from 10% of GDP in 2007-08 to 11.2% in 2024-25. This has been driven by the rising cost of state pension commitments and disability and incapacity benefits, researchers found. These payments account for more than 90p of every £1 spent on welfare.
But changes to the welfare state have been felt unevenly across the population, the report said. Pensioners have gained on average £900 a year, while working-age families have lost on average £1,500 a year.
The hardest hit groups since 2010 have been out-of-work households receiving benefits, who have lost on average £2,200 a year, and large families of three children or more, who are worse off by £4,600 on average.
Outside pensions and disability benefits, expenditure on welfare is set to fall from 4.1% to 3.9% of GDP between 2024-25 and 2028-29, the Resolution Foundation found. While this represents a modest rise in spending of £1.6bn in real terms, that amount may not be enough to address the severity of poverty and housing instability caused by earlier cuts. “There is substantial evidence that core levels of benefits are inadequate,” the Resolution Foundation said.
The next government will have to grapple with the rollout of the two-child limit introduced in April 2017, which prevents parents from claiming child tax credit or universal credit for more than two children. This will push 51% of families with three or more children into poverty by 2028-29, according to the Resolution Foundation. The policy was introduced by the Conservative government under David Cameron, but the Labour leader, Keir Starmer, has so far resisted pressure to rescind it.
Freezes to the local housing allowance, even as rents rise 13% by 2027, will put more people at risk of homelessness, researchers said. The number of families living in temporary accommodation has doubled since 2010.
Both Labour and the Conservatives have committed to maintaining the pensions triple lock until the end of the next parliament, which means the state pension increases every April. But the parties diverge on their commitments to disability spending, with the Tories pledging to make cuts of £12bn a year.
The Resolution Foundation pours cold water on the suggestion that such cuts are manageable over the course of the next parliament without taking money off existing recipients. Labour did not immediately respond to a request for comment on its plans for disability benefits.
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“Welfare reform is currently focused on disability-related benefits, which is understandable given that spending is due to rise by £10bn a year over the next parliament,” said Alex Clegg, an economist at the Resolution Foundation.
“But whoever wins the next election will face wider welfare challenges, from homelessness to childhood poverty,” he added.