Michelle ThompsonThe Trussell report reveals that increased poverty levels are causing the UK to miss out on £38 billion in potential annual economic output.
Keir Starmer has been cautioned that Labour’s strict approach to welfare is draining billions from the UK economy each year and placing greater demand on public services by driving more people into poverty.
According to the anti-poverty charity Trussell, the government’s planned benefit reductions—despite assurances against austerity—are deepening hardship and harming both the economy and public finances. The charity’s report argues that sustained poverty levels are preventing the UK from generating over £38 billion in annual economic output.
This warning coincides with Labour’s upcoming child poverty strategy, due in June, and increasing dissent within the party over Chancellor Rachel Reeves’s £5 billion in benefit cuts outlined in the spring statement. Despite pressure, ministers are reportedly unwilling to remove the two-child benefit cap, a policy dating back to the Conservative government, which critics say could push child poverty to record highs.
Trussell urged the government to reconsider welfare cuts, stating that any short-term savings are outweighed by long-term economic losses and harm to individuals. Research by WPI Economics for the charity found 9.3 million people faced significant hardship in the year to March 2023, with 6.3 million adults and 3 million children falling below the poverty threshold used by the Social Metrics Commission.
The report links poverty to lower employment and productivity, resulting in a loss of £38.2 billion in economic output. This also leads to £18.4 billion less in tax income and an additional £5.3 billion in welfare costs. Public services face further strain, costing around £13.7 billion annually, including £1.5 billion in extra school support for children in poverty.
While acknowledging that reforms take time, Trussell called for immediate policy changes. Eliminating the two-child cap could lift 670,000 people—including 470,000 children—out of severe hardship and reduce public costs by over £3 billion.
The charity also pressed for changes to universal credit, including an “essentials guarantee” to help over 2 million people escape deep poverty, and opposed planned disability benefit cuts.
Helen Barnard, Trussell’s policy director, condemned the cuts as “cruel and irresponsible,” warning they would worsen pressure on public services and harm the economy. She emphasized the moral and financial imperative for government action to reduce hunger and reliance on food banks.
In response, a Department for Work and Pensions spokesperson highlighted reforms aimed at helping people back into work and reducing poverty, including a £1 billion employment support package, increased living wage, and fairer repayment terms for universal credit recipients.
