IFS: Northern Ireland faces being hit hard by tax and benefit changes

Northern Ireland faces being hit harder by changes announced to the tax and benefit systems due to come into force between Jan 2011 and Apr 2014, the IFS says.

Northern Ireland faces being hit harder by the changes announced to the tax and benefit systems by both the previous government and the current one, due to come into force between January 2011 and April 2014 according to a new report.

Research commissioned by the Law Centre of Northern Ireland and carried out by the respected Institute of Fiscal Studies shows that excluding London, Northern Ireland faces the largest fall in net income as a result of the changes to be implemented.

The research highlights that net income in Northern Ireland will in total fall by just under 4% of which 2% is attributable to the coalition’s Emergency Budget in June.

The IFS explains that the relatively large average losses being faced by Northern Ireland can be explained in part by to two key factors:

• The high numbers of residents in Northern Ireland who claim Disability Living Allowance (the highest proportion per thousand of population of anywhere in the UK) who will feel the impact of;

The relatively high number of families in Northern Ireland with children who face cuts to child benefit.

The briefing goes on to explain:

“Because those on lower incomes in Northern Ireland are relatively more likely to receive DLA and more likely to have children they lose more as a proportion of their income than those in the same part of the UK income distribution.”

By contrast, however, the IFS concludes that the relative absence of the UK’s richest households in Northern Ireland means that the province is less affected by tax rises outlined by Alistair Darling before the election.

Responding to the findings in a report which covered the impact of all of the UK’s regions, James Browne, senior research economist at the IFS, said:

“Tax and benefit reforms to come into force over the next few years will reduce incomes in London and Northern Ireland by more than in other regions of the UK. London is particularly affected by the tax increases and cuts to housing benefit, while Northern Ireland contains relatively more Disability Living Allowance claimants and families with children, both of whom will see their benefits cut.”

The latest research comes just a month after Left Foot Forward reported on findings that coalition policies will see cuts worth £450 million to Northern Ireland’s welfare budget with concerns that it will cause significant hardship for many vulnerable groups. At the time, Lucy Cochrane from Citizens Advice Bureau Northern Ireland warned:

“Citizens Advice is very concerned about the impact of the benefit cuts and many clients have already been contacting us and are frightened about how they will be affected, especially people who have long-term health problems.

“The cuts will not only impact those who are worse off financially but will also have an impact on the Northern Ireland economy. We are particularly unhappy with the plans for working tax credits and childcare provision which will actually narrow the goalposts for some people wishing to return to work.”

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