Striving middle-class households to be left poorer by Iran war this year but large families on handouts set to be richer thanks to Labour's benefits spending splurge, report finds

By DAVID CHURCHILL, JOHN-PAUL FORD ROJAS AND CLAIRE ELLICOTT Published: 00:01, 13 April 2026 | Updated: 00:08, 13 April 2026 Striving middle-class households will be left poorer by the Iran war this year but large families on handouts will be richer thanks to Labour's benefits spending splurge. Typical middle earner households were previously set for a £300 boost this year but are now projected to take a £480 hit because of the economic shockwave sparked by the conflict. By contrast, those with three or more children in the bottom half of earners will have their household incomes boosted by £1,400, according to analysis. This represents an inflation-busting average 7.7 per cent boost to their living standards, even after the shock of rising prices sparked by the war in the Gulf. The study by the Left-wing Resolution Foundation thank tank found this was largely thanks to Labour splurging billions on scrapping the two-child benefit cap. Critics tonight branded it a cynical 'betrayal' of Middle England by Sir Keir Starmer in a bid to shore up the Left-wing vote ahead of local elections next month which are projected to be disastrous for Labour. Tory Shadow Chancellor, Sir Mel Stride, said: 'While Rachel Reeves doles out a benefits bonanza, millions of hard-working families are being taken for a ride - and watching those on welfare leapfrog them. Tory Shadow Chancellor Sir Mel Stride said Labour had splurged on a 'benefits bonanza'  Former Tory leader Sir Iain Duncan Smith said Labour's benefits spending splurge while hiking taxes for the middle classes was a 'betrayal'  Chancellor Rachel Reeves announced the two-child benefit cap would be lifted in her Autumn Budget last year  'If you work, you should be better off. It's that simple.' Former Tory leader Sir Iain Duncan Smith added: 'It's a complete betrayal of what Starmer said he would do. 'He said he would be everybody, and he's not. 'He and his Chancellor are so desperate they've now decided who's important in their electoral forecasts, just before the council elections. 'Meanwhile, the middle-class can go hang - that's their view. 'It's appalling. The middle-class - the people that start businesses, work hard and build Britain - are getting absolutely thrashed.' William Yarwood, media campaign manager at the TaxPayers' Alliance said: 'Taxpayers will struggle to understand why they're being squeezed while welfare recipients are set to see significant gains. 'Ministers must reverse course, restore the cap and rebuild a system where hard-work is rewarded, not penalised.' Restore Britain MP Rupert Lowe said: 'Britain is now exclusively designed to protect freeloaders, illegals and the unproductive. 'Slashing both tax and the size of the rotten state is the only way to make Britain more affordable, with urgent measures to reduce the cost of fuel which is soaring due to the Iran war.' The Resolution Foundation study found typical working-age households were previously on course for a 0.9 per cent, or £300 boost, to their incomes this year. But they will now instead find themselves 0.6 per cent, or £180, worse off. It means overall they are losing out to the tune of £480 from the inflation shock. The analysis shows that the removal of the two-child limit on benefits will deliver a major boost to those with three or more children who are in the bottom half of UK earners. They will see their living standards rise by an average 7.7 per cent, even after the shock of rising prices caused by the conflict. This compares with 0 per cent for poorer families with fewer than three children. The cost of living squeeze is being driven by a surge in global oil and gas prices, after the war choked off supplies from the Middle East. Even after the ceasefire between the US and Iran, higher prices driven by inflationary pressures are expected to last for months. However, benefit claimants will be cushioned from the cost-of-living crisis after Labour last week hiked handouts for 6.5million Universal Credit claimants by 6.2 per cent - double the current rate of inflation. Thousands of jobless families will receive windfalls worth thousands each after the two-child benefit cap was also scrapped last week. Analysis of official figures shows ditching it will hand thousands of pounds a year in extra benefits to almost 200,000 large families in which no one goes out to work. Figures suggest the move could result in the largest affected families qualifying for more than £10,000 a year in additional benefits. By contrast, official figures last month showed average pay in the public sector rose by 5.9 per cent in the three months to January. The figure for the private sector was just 3.3 per cent. It comes amid motoring families' incomes being eaten into by soaring petrol and diesel prices, with the average cost of a fill-up with petrol being around £14 more than before the conflict and nearly £30 for diesel. And energy bills are predicted to rise by more than £200 from the summer, with industry estimates suggesting UK inflation could rise to 10 per cent. James Smith, chief economist at the Resolution Foundation, said: 'Despite hopes for a sustained peace, the path of this conflict remains uncertain and energy prices remain well above pre-war levels, meaning many households face a decline in their purchasing power this year. 'This squeeze will run right through the income distribution. 'Lower-income households will still see some income growth thanks to a long-awaited rise in real benefit levels, but inflation will likely knock more than a percentage point off what they stood to gain. 'For those in the middle and towards the top of the income distribution, even the thin growth they had been expecting has tipped into negative territory.' No comments have so far been submitted. Why not be the first to send us your thoughts, or debate this issue live on our message boards. By posting your comment you agree to our house rules. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual. Do you want to automatically post your MailOnline comments to your Facebook Timeline? Your comment will be posted to MailOnline as usual We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. To do this we will link your MailOnline account with your Facebook account. We’ll ask you to confirm this for your first post to Facebook. You can choose on each post whether you would like it to be posted to Facebook. 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