DWP PIP CUT £500 a Year: Lower-income Households in the UK could become £500 Poorer every year

DWP PIP CUT £500 a Year: Lower-income households in the UK could become £500 poorer per year over the next five years due to recent policy decisions made in the Chancellor’s spring statement. According to the Resolution Foundation, the measures announced by Chancellor Rachel Reeves are likely to hit millions of struggling families, especially those on welfare benefits.

Who Will Be Affected?

The changes in the spring statement will mainly affect around three million families on incapacity benefits. In addition, 800,000 people on Personal Independence Payments (PIP) will see reduced support.

The government’s own analysis reveals that around 250,000 more people, including 50,000 children, will fall into relative poverty after housing costs by the end of the decade. This comes as a result of welfare cuts and stricter spending controls on public services.

Resolution Foundation’s Findings

The Resolution Foundation, a leading think tank focused on economic issues affecting low and middle-income households, said that the weakest parts of the population will feel the most pressure. Their early analysis shows that the poorest 50% of working-age households will lose an average of £500 a year in income over the current Parliament.

Ruth Curtice, Chief Executive of the foundation, said:

“The outlook for living standards remains bleak. Britain’s poor economic performance, combined with policies that fall hardest on those with modest incomes, mean that 10 million households could end up worse off.”

Government’s Justification

In response to criticism, Rachel Reeves defended the spring statement by writing in The Times that there are “no quick solutions” to fix the economy. She highlighted improvements such as falling interest rates, rising wages, and shorter NHS waiting lists, claiming that early signs of recovery are visible.

She added that “shovels are in the ground and cranes in the sky,” pointing to infrastructure and defence investments.

How Will the Budget Be Balanced?

According to the Office for Budget Responsibility (OBR), about £14 billion in savings were made through cuts in welfare and a reduction in daily spending across government departments. A portion of this also came from planning reforms and other structural changes.

However, the OBR also reduced its 2025 GDP growth forecast from 2% to just 1%. Although the following years are expected to show better growth, the £9.9 billion buffer Ms Reeves has kept to meet her fiscal rules is considered small by historical standards.

Uncertainty Ahead of the Autumn Budget

Economists, including Paul Johnson from the Institute for Fiscal Studies (IFS), warned that the Chancellor’s spring statement has opened the door to uncertainty ahead of the autumn budget. There are concerns that the lack of clarity may cause unnecessary speculation around tax hikes and public finances in the coming months.

With global trade tensions on the rise—especially after Donald Trump announced a 25% tax on US car imports—experts fear that external risks could also threaten the UK’s fragile financial position.

The UK’s spring statement has sparked concerns among economists, unions, and the public. Lower-income families are expected to bear the brunt of welfare cuts, while the long-term recovery of the economy remains uncertain.

With a reduced budget buffer and global trade risks looming, the next few months leading up to the autumn budget will be crucial. For now, the message is clear: many households in Britain’s bottom half of the income scale are set to struggle even more unless major policy changes are introduced.

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