Radical changes to the UK welfare system implemented by the Conservatives over the past decade have disproportionately benefited pensioners and individuals on disability benefits, while working-age families face significant financial losses, according to a recent report by the Resolution Foundation.
The report highlights that the Conservative Party’s 14-year overhaul of social security has redirected spending from children and housing to supporting the elderly, breaking the link between entitlement and need for some of the nation’s poorest households.
Although the welfare state’s size has slightly increased from 10% of GDP in 2007-08 to 11.2% in 2024-25, this rise has been driven by the increasing costs of state pensions and disability and incapacity benefits, which now account for over 90p of every £1 spent on welfare.
The financial impacts of these welfare reforms have been uneven across different demographics. Pensioners have gained an average of £900 annually, while working-age families have lost an average of £1,500 per year. The hardest-hit groups since 2010 include out-of-work households receiving benefits, losing an average of £2,200 annually, and large families with three or more children, who are £4,600 worse off on average.
The Resolution Foundation found that, outside of pensions and disability benefits, welfare expenditure is set to decrease from 4.1% to 3.9% of GDP between 2024-25 and 2028-29. While this represents a modest real-term spending increase of £1.6 billion, it is unlikely to address the severe poverty and housing instability resulting from previous cuts. “There is substantial evidence that core levels of benefits are inadequate,” the report states.
The upcoming government will face the challenge of managing the two-child limit introduced in April 2017, which restricts parents from claiming child tax credit or universal credit for more than two children. This policy is projected to push 51% of families with three or more children into poverty by 2028-29. Despite pressure, Labour leader Keir Starmer has resisted calls to repeal the policy.
Additionally, freezes on local housing allowances, despite rising rents expected to increase by 13% by 2027, will heighten the risk of homelessness. The number of families in temporary accommodation has doubled since 2010.
Both the Labour and Conservative parties have committed to maintaining the pensions triple lock until the end of the next parliament, ensuring state pension increases every April. However, their approaches diverge regarding disability spending, with the Tories proposing £12 billion in annual cuts, a move the Resolution Foundation suggests is unfeasible without impacting current recipients. Labour has yet to comment on its plans for disability benefits.
“Welfare reform is currently focused on disability-related benefits, which is understandable given that spending is due to rise by £10 billion 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.
