Resolution Foundation

@resolutionfoundation.org

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The Resolution Foundation is an independent think-tank dedicated to lifting living standards in the UK.

25% of the cash benefit of a VAT cut will flow to the richest fifth of families, compared to 16% for the poorest fifth. Targeted energy discounts could see low and middle income families gain more than twice as much.
Graphic with text 1 Gen Z progress Millennials – those born between the early 1980s and mid-1990s – are the first generation not to have enjoyed higher disposable incomes than previous generations. But Gen Z doesn’t appear to be suffering from the same stalled progress. For 20-26-year-olds born in 1996-2000, incomes are up by £3,700 (15%) on those born a decade ago at the same age.
chart showing Real annual funding commitments, EU and UK institutions (£ billion, 2025-26 prices, and per cent of GDP): UK.
Figure showing the growing number of children living in the private rented sector. While fewer than one-in-ten under-11s lived in the PRS in 2000-01, by 2024-25 it was one-in-four. The number of children living in the private rented sector has tripled – from 1.1. million children in 2000-01 to 3.2 million in 2024-25. As a result, children are now more likely than adults to live in the tenure (23 per cent compared to 22 per cent).
Financial capacity of the National Wealth Fund, British Business Bank, National Housing Bank, and UK Export Finance, by Parliament and finance type: UK
James Smith, Chief Economist at the Resolution Foundation, said: “The fall in inflation to 2.6 per cent last month is welcome news for families and gives the new Government some early breathing space of its own. “But it is likely to prove short-lived. Renewed tensions in the Middle East have pushed energy prices back up in July, and with the price cap rising in July and forecast to rise again in October, inflation is set to climb again and peak later this year despite the Government’s VAT cut on electricity bills. “All of this means cost of living pressures certainly have not gone away. The Government is right to focus on what it can do to ease the pressure on struggling families. The priority should be providing fully funded and targeted support to vulnerable households.”
Chart showing proportion of 20-29-year-olds receiving an inheritance and or gift of at least £1,000 and £10,000 in the last two years, by net income quintile: GB 2018-20. In both cases, inheritances and gifts are skewed towards those on higher incomes.
Distribution of government spending by household income quintile under two GB policies: Electricity VAT cut gives rising shares from poorest to richest (16%, 18%, 20%, 22%, 25%), while Targeted discounts concentrate benefits in the poorest quintiles (41%, 33%, 20%, 6%, small remainder).
25% of the cash benefit of a VAT cut will flow to the richest fifth of families, compared to 16% for the poorest fifth. Targeted energy discounts could see low and middle income families gain more than twice as much.
Figure showing the growing number of children living in the private rented sector. While fewer than one-in-ten under-11s lived in the PRS in 2000-01, by 2024-25 it was one-in-four. The number of children living in the private rented sector has tripled – from 1.1. million children in 2000-01 to 3.2 million in 2024-25. As a result, children are now more likely than adults to live in the tenure (23 per cent compared to 22 per cent).
The UK’s public financial institutions, their sponsoring departments, and other associated public investment bodies, July 2026
Chart showing the proportion of young adults in different housing tenures, by age group and time period: UK
We're hiring - Director - To develop and deliver organisational strategy and lead research and policy programme Apply by 08:59 on Friday 14 August £90,000 + dependent on experience
Ruth Curtice, Chief Executive of the Resolution Foundation, said: "Cutting VAT on electricity bills will provide a welcome reduction in the bill that has been at the heart of the cost of living crisis. But because the support goes to everyone, and benefits higher income families more, it will not provide significant support for those most exposed to rising gas prices this winter. With bills still set to rise over £150 this October, this money would have been better spent on more targeted support."
To climb out of a hole, you have to first understand its shape. The hole in the UK’s public finances is deep – public debt has nearly tripled since the financial crisis. Low growth, as well as being disastrous for living standards, is a key driver. But our ageing and ailing population also plays a huge role in our fiscal woes. Even if you stop digging, the hole will keep getting bigger. But while climbing out will be long and hard, it isn’t impossible. Resolution Foundation research published today sets out how to avoid the explosive debt path forecast by the OBR. Let’s focus on what that means for you, in this Parliament.
chart showing Real annual funding commitments, EU and UK institutions (£ billion, 2025-26 prices, and per cent of GDP): UK.
Financial capacity of the National Wealth Fund, British Business Bank, National Housing Bank, and UK Export Finance, by Parliament and finance type: UK
chart showing Social security spending as a proportion of GDP, by category: GB
Chart showing projected annual growth in non-pensioner after housing costs disposable household income, by income vigintile: UK
Dear Chancellor (whoever you are), I advised a few (nine!) Chancellors in my time in the Treasury but never before did I get to write what I think, uninhibited. Even so, Jeremy Hunt said he appreciated me “speaking truth to power with a smile”. So, as you read this unsolicited advice, I promise I’m smiling…
Chart showing estimated changes to the OBR's March 2026 forecast for public sector net borrowing: UK
We're hiring - Director - To develop and deliver organisational strategy and lead research and policy programme Apply by 08:59 on Friday 14 August £90,000 + dependent on experience
Chart showing successive OBR forecasts of the current budget balance as a percentage of GDP outturn: UK
Chart showing long-term projections for public sector net debt as a proportion of GDP under different assumptions: UK Half the long-term rise in the debt-to-GDP ratio can be mitigated by addressing public services productivity, the triple lock and lost motoring tax receipts
Chat showing summary of deman-side policy reforms, current and recommended extentensions: 2025-26/2026-27
Chart showing real-terms public sector current receipts, outturns and counterfactual projections: UK
Chart showing Proportion of the population by age group (left panel) and proportion aged 22-64 (right panel): UK
Chart showing Change in real health-related spending by central government since 2012-13: UK
Chart showing Measures of public services performance and satisfaction: England/England & Wales