Rachel Reeves promised a cost-of-living budget, and on some measures, she delivered.
The chancellor used her budget speech this week to announce an end to the two-child limit on benefits, take levies off energy bills, freeze NHS prescription charges and rail fares in England, and raise the minimum wage. All of this will make some difference, especially for women, who disproportionately contend with soaring living costs – juggling unpaid care, low wages and rising household bills.
But in other areas, the Labour government did not go far enough to reduce other hardships that are felt particularly acutely by women. Reeves failed to introduce measures that could have alleviated homelessness, addressed some of the inequalities in the tax system, and led to a redistribution of the UK’s wealth.
Lifting the two-child limit on Universal Credit is unquestionably a landmark step towards tackling child poverty. Since its introduction in 2017, the policy has locked families into hardship. Campaigners have for years argued that punishing children for the number of siblings they have makes neither moral nor economic sense, given the billions that child poverty costs every year to those children’s life chances and the impact on public services.
Our analysis at the Women’s Budget Group shows that scrapping the limit will lift more than half a million children out of poverty by the end of the decade – restoring their dignity, hope, and opportunity. The impact will be particularly stark among single parents, who make up half of the families affected by the policy and are overwhelmingly women. Many have been pushed into debt or skipped meals to absorb the shortfalls created by the limit. Ending it also removes an abhorrent bureaucratic cruelty: the so-called ‘rape clause’, which required survivors to prove their trauma to access support.
Yet even this historic step comes with a caveat. For some families, relief will be short-lived as they will face the benefit cap, which restricts the total amount of social security a household can receive unless it earns the equivalent of 16 hours at minimum wage. For single parents – again, mostly women – the balancing act between unpaid and paid work is harder than for dual-parent households; many struggle to work 16 hours while juggling childcare. It is no surprise that single parents make up nearly 70% of families whose benefits are capped.
Another missing piece was housing support. Reeves chose not to unfreeze Local Housing Allowance, despite housing benefits not keeping pace with soaring rents. Our analysis revealed that private rent now absorbs an average of 58% of women’s income, compared with 42% of men’s. Unfreezing and permanently re-linking Local Housing Allowance to local rents would have been an obvious intervention to match social security to actual living conditions, and would have protected the most vulnerable from poverty and homelessness. Single mums already make up the majority of statutory homeless families.
On taxation, the budget has been described as a smorgasbord, and not without reason. Some glimmers of ambition include a targeted surcharge on properties valued over £2m, higher taxes on gambling, and modest increases on investment income from dividends, savings and property. These steps acknowledge that unearned wealth and socially harmful activities can and should be taxed more fairly. Yet they stop short of the structural reform that was needed.
Britain’s most entrenched and growing sources of wealth – financial assets, property portfolios, capital gains, inheritances – remain largely undisturbed. The chancellor could have equalised capital gains and income tax, taxed banks whose profits have swelled simply because of high interest rates, or actually introduced a wealth tax, raising billions of extra pounds in tax revenue. Instead, the single largest revenue generator is the least progressive option: extending the freeze on income tax thresholds for three more years.
Known as ‘fiscal drag’, as wages rise with inflation, more people fall into higher tax thresholds while their real living standards may not have risen. Women are more likely to be hovering near the personal allowance, so more women will now fall into the basic rate for the first time. Because women’s wages tend to be lower than men’s, a larger proportion of their pay will be taxed compared to equivalent thresholds. Earlier plans to increase everyone’s income tax rates by 2p would have been fairer and more progressive. Instead, the government has opted for a more regressive change.
The minimum wage rises are also undeniably a gain. Women, who are twice as likely as men to be in low-paid work, stand to benefit most. But another caveat looms here: Providers of early education and childcare and social care are already facing workforce shortages and rising operating costs. Together with the changes to employers’ National Insurance contributions in last year’s budget, this may stretch services even further.
This highlights a deeper structural challenge: women make up the majority of workers in these sectors and rely on these services to access paid work themselves. If we want to improve living standards, these services must be seen as essential social infrastructure, not fiscal liabilities.
Reeves was under pressure to cut public spending, and of the two options in front of her, raising taxes was preferable. But after years of austerity followed by the pandemic and then a cost of living crisis, we need much greater ambition to restore these vital foundations of our economy and society, which could be done through more ambitious tax reform and changes to the government’s fiscal framework.
A cost-of-living budget should not merely help people endure the crisis; it should begin to reshape the conditions that create it. This budget fell short of doing that.
Erin Mansell is Interim Deputy Director at the Women’s Budget Group
