Resolution Foundation Criticizes £4.4bn Cost of Living Support Package 2026

The Resolution Foundation has criticized the government's £4.4bn cost of living support package as "badly targeted," arguing it fails to reach the poorest households effectively. The intervention comes as Lloyds Banking Group reported doubled quarterly profits and signaled hopes that the bank tax surcharge is temporary.

What the Resolution Foundation Said About the Support Package

The Resolution Foundation, a leading economic think tank, assessed the £4.4bn package announced by John Healey and concluded that the support is poorly designed. According to the foundation, the measures do not focus enough on low-income families who are most vulnerable to rising costs.

This criticism matters because the package is meant to ease the burden of inflation and high energy bills. If the money is not reaching those who need it most, the policy's effectiveness is in question.

Why Targeting Matters for Low-Income Households

Low-income families spend a larger share of their income on essentials like food and heating, so they feel price rises more acutely. Universal or poorly targeted support can end up benefiting better-off households disproportionately.

The Resolution Foundation's critique echoes its earlier warnings about housing costs squeezing low-income families. As we reported, the housing cost crunch hits low-income families hardest, leaving less room in budgets for other essentials.

Without precise targeting, the £4.4bn could be spread too thin or miss the households that are cutting back on basics. That undermines the goal of stabilizing living standards during a cost of living crisis.

Lloyds Profits and the Bank Tax Surcharge

On the same day, Lloyds Banking Group reported pre-tax profits of £2.3bn for the latest quarter, double the previous year. The bank benefited from higher interest rates, which boosted net interest income by 10%.

However, Lloyds' share price fell as much as 6% in early trading before recovering to a 3.1% decline. Analysts at Jefferies noted that revenue missed expectations by 1% and net interest margin was below forecasts.

Lloyds' CFO William Chalmers said the bank hopes the tax increase on banks is a "temporary measure." The chancellor doubled the additional levy banks pay on profits to 6%, but the increase will only last for 15 months.

How the Bank Tax Affects Lending and the Economy

Chalmers explained that Lloyds lends out 99 pence of every pound in deposits and aims to do more. He acknowledged the fiscal environment is challenging but recognized the surcharge as a government decision.

The bank tax rise comes amid broader fiscal pressures. As covered in our report on the defence spending tax rise on middle earners, the Resolution Foundation has also warned that middle-income households will bear a heavier burden from tax changes.

Higher bank taxes could reduce lending capacity or be passed on to customers through higher fees and lower savings rates. That risk is why the banking sector watches such measures closely.

Key Takeaways

• The Resolution Foundation says the £4.4bn cost of living support is badly targeted and may not help the poorest households.
• Lloyds Banking Group's quarterly profits doubled to £2.3bn, but its share price fell on revenue miss and margin concerns.
• The bank tax surcharge was doubled to 6% for 15 months, and Lloyds hopes it is temporary.
• Targeting matters because low-income families spend more of their income on essentials and are more exposed to price rises.
• Higher bank taxes could affect lending and customer costs, with implications for the broader economy.

Comparison of Key Figures

The contrast between bumper bank profits and poorly targeted support highlights the political challenge of balancing fiscal responsibility with social need. As the government seeks to shore up public finances, the design of support will remain under scrutiny.

For context on how corporate decisions affect jobs and investment, see our coverage of BP's plan to sell its North Sea business, which is part of a broader shift in the UK's business landscape.

Meanwhile, the Resolution Foundation's warnings about housing and tax burdens suggest that low- and middle-income households will continue to face pressure. Even niche campaigns, like the Oris Divers Sixty-five special edition supporting Movember, show how organizations rally around social causes—but systemic support requires government action. The background to this story is set out in UK Chancellor Targets Cost of Living in First Budget. A related thread runs through Lloyds Bank AI Cost Cuts: £2bn Savings Strategy.

What to watch next: whether the government adjusts the support package to improve targeting, and how banks respond to the temporary tax surcharge in their lending and pricing decisions. Earlier coverage in Lloyds Bank AI Cost Cuts: £2bn Strategy for Growth shows how the argument developed. A closer look at the same subject appears in Lloyds Bank AI Strategy Cuts £2bn Costs, Boosts Growth.