Reflections on the 2025 Autumn Budget

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02 December 2025

Now the dust has settled on the Autumn Budget Statement, it is important to reflect on how decisions made in that Statement will impact our clients and our wider community. The content below reflects the perspective of CASW only.

There has been much criticism of the Budget on the grounds that it does not do enough to spur on economic growth. Though this is important to our community in the widest sense - a growing economy will positively impact employment, wages and financial resilience - our focus is on what the Budget does for those in financial difficulty now.

Budget Statements, especially those delivered in the Autumn, are never perfect affairs. They can’t solve every current and impending problem facing every class of citizen, and they are not designed to. Yet, they are perennially criticised for not doing so. So, what does this Budget do for low income households?

The headline announcement was the abolition of the Universal Credit ‘2 child limit’. This is the limit put on UC payments for any third or more child(ren) of parents claiming Universal Credit. It is not to be confused with the wider ‘Benefit Cap’, which places an overall limit on the amount of means-tested benefits any household can get. The ‘Benefit Cap’ remains, much to the disappointment of many.

However, even with no action being taken on the wider ‘Benefit Cap’, it is estimated that abolishing the UC ‘2 child limit’ will lift approximately 450,000 children out of poverty. This, by any measure, is an enormous step in the right direction in the fight to eliminate child poverty.

For those in low paid work, there was also good news. The National Living Wage (affecting those over 21 years of age) will rise by 4.1% in April, an above inflation rate increase. Additionally, the National Minimum Wage (affecting 18-20 year olds) will increase by 8.5%; further eroding age discrimination in minimum wage levels.

Working age welfare benefits will rise by 3.8%, in line with inflation, while the State Retirement Pension and Pension Credit (the main means-tested benefit for low income pensioners) will rise by 4.8%; again, above inflation increases.

For those with health conditions, Prescription Charges will be frozen. For those with young children, there was a commitment to restore the value of the Healthy Start Scheme from 2026-27 and to look again at eligibility criteria. For those on Universal Credit who are trying to save money, the existing ‘Help to Save’ Scheme will also be expanded.

In other areas, affecting a wider population, the two main headlines were the freeze on most rail fares to sit alongside the current bus fare discount, the temporary extension of the existing ‘fuel duty freeze’, and the commitment to reduce average energy bills by £150 above and beyond the financial support already provided under the Warm Homes Discount.

Though a range of measures made the headlines on Budget Day, several important and related announcements had been made in previous weeks which need repeating here. Firstly, the UC Standard Allowance will rise by 5% in April. Holiday Activities and Food (HAF) programmes funding has been extended for three years. Free School Meals will be extended to children of all parents in receipt of Universal Credit from September 2026. And the Warm Homes Discount (WHD), providing financial support for energy bills for those on means-tested benefits, was also extended.

That was the good news, or most of it that relates to the daily living costs of our clients and wider community.

Like any Budget, there was also some bad news which we need to report here for a balanced view.

One of the ‘pre-announcements’ centred on proposed reductions in UC payments to those with disabilities. This will negatively impact any claimant who is judged ‘unfit to work’ due to illness, disability or long term health condition. Other proposed reforms, to Personal Independence Payments (PIP), which would make it harder for disabled people to claim this benefit were postponed in the Summer but they have not gone away.

The ‘headline negative’ in the budget for low income households was considered to be the freeze in Income Tax Thresholds. This would affect those in work whose earnings rise sufficiently for them to start paying income tax or push them into a higher income tax bracket. This is not technically a tax increase but the impact is the same for those affected.

To be clear, this is not a new policy. It started under the previous government and was already expected to continue for the next couple of years. What this government did was to keep the existing policy, rather than increasing thresholds in line with inflation (which would have been good but costly), and suggest it might need to be extended another couple of years.

Of course, the Budget is not the only place where government decisions are made. Outside the Budget bubble, the government recently passed the Renters Rights Act and is currently working on the Employment Rights Bill; both of which will significantly address the current imbalance of power between, respectively, renters and landlords, and workers and employers.

There are numerous other unheralded reforms in the legislative pipeline which will help our lowest income and most vulnerable clients, from reforms to Council Tax administration practices and the debt enforcement sector to reforms of consumer standards for providers of smart meters and reforms to Child Maintenance payments.

The bigger picture is complicated but from the perspective of low income and vulnerable households the direction of travel - with the notable exception of the issue of disability benefits - is, we believe, positive, if slower than we would all prefer.

If you want to explore the Budget in greater detail yourself, go to https://www.gov.uk/government/publications/budget-2025-document or read the summary held in the Library of the House of Commons at https://commonslibrary.parliament.uk/research-briefings/cbp-10405/ .

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