Spending Review offers opportunity to brighten bleak living standards outlook for low-to-middle income families

After a tough Budget and Spring Statement for low-to-middle income households, the Spending Review could brighten a bleak living standards outlook by prioritising spending on services they use the most, according to new research published today (Wednesday) by the Resolution Foundation.

The research notes that public services are crucial for quality of life, providing ‘in-kind’ benefits worth £13,000 per household on average. Furthermore, while household disposable income is projected to fall from 2025-26, public service spending is rising – by £18 billion a year in 2028-29 in real terms.

However, public services are not used equally across all households. So the allocation of extra funding between departments at the June Spending Review will determine which families benefit.

The report uses a novel data-driven approach to analyse the £320 billion (or two-thirds) of day-to-day public spending that provides in-kind benefits to show how the Spending Review could put poorer and middling families first.

In general, day-to-day public service spending is already tilted towards lower-income families, with the poorest fifth of households receiving £15,900 benefits-in-kind, 53 per cent more than the £10,400 going to the richest fifth.

But the report finds that specific services are much more weighted towards the less well-off. The poorest fifth receive around three times as much in school funding (£3,800 compared to £1,200) and childcare (£480 compared to £130), and nearly six times as much in adult social care on average (£350 compared to £30).

Transport spending is the key exception to this progressive slant – with the richest fifth of households receiving almost three times as much road and rail services than the poorest fifth (£740 compared to £270). Conversely, buses are twice as likely to be used by the poorest fifth of families as the richest fifth (£130 compared with £70).

Resolution analysis of new YouGov polling also finds that lower-income families (with  incomes less than £25,000) report lower satisfaction with a range of public services than richer households (£70,000+).

Their net satisfaction scores (excluding don’t knows) are lowest for councils (-38), adult social care (-29), justice and courts (-29), and GP Services (-21). Schools, early education and childcare, and leisure are the only public services with positive net satisfaction (+2).

The Foundation says that addressing this satisfaction deficit across public services should lie at the heart of the upcoming Spending Review.

For example, assuming defence spending reaches 2.5 per cent of GDP as planned, a broad approach that saw day-to-day health spending grow by 2 per cent, rather than its long-run average since 1949 of 3.6 per cent would avoid the need for cuts to Local Government, Justice and the Police. A higher allocation of capital to health than in previous years might help make this, and improvements in NHS productivity, more feasible.

Spending within departments can also be tilted more towards lower-income families. Extending free school meals to all families receiving Universal Credit – at a cost of £1.2 billion from the education budget – would lift a further 100,000 children out of poverty, while rebalancing support towards apprenticeships could also help to tackle Britain’s NEETs problem.

A Spending Review settlement that allocated funding in this way would deliver a cash-equivalent gain of £370 a year on average for the poorest decile, compared to a £150 boost for the richest.

An alternative ‘health only’ approach – in which NHS spending rose by 3.6 per cent while unprotected departments faced cuts up to 1.1 per cent each year – would see all households receive similar cash-equivalent gains of around £260.

Emily Fry, Senior Economist at the Resolution Foundation, said:

“Britain’s outlook for real disposable incomes is bleak, especially for poorer households after the benefit cuts announced at the Spring Statement. But the wider picture is more positive when the £18 billion boost to public services is included, as this will provide vital ‘in-kind’ benefits, particularly for poorer households.

“Lower-income families make greater use of services like schools, childcare and adult social care, and have seen the quality of those services decline over time.

“A focus on improving families’ experience of a range of downtrodden services in the Spending Review could help boost quality of life for lower income families in a challenging living standards environment.”

Notes to Editors

The figures on satisfaction with public services are from YouGov Plc. Total sample size was 2,321 adults. Fieldwork was undertaken between 17th – 18th February 2025. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+). The figures presented from the online surveys have been analysed independently by the Resolution Foundation. The views expressed here are not the viaews of YouGov.