Is this the least ‘family friendly’ government ever?

Tim Horton and Howard Reed analyse the effect the budget will have on families, looking at whether this is the least 'family friendly' government ever.

By Tim Horton and Howard Reed

Analysis we published following last week’s budget looks at the impact of the coalition’s tax and benefit changes on low-income families with children. We look at the reforms that will take place by April 2012 and compare this to the system the coalition government inherited in April 2010.

One striking finding is that many single-earner families will be losers when you weigh up any gains from cuts to income tax and national insurance against losses from the VAT rise and cuts to tax credits and child benefit.

A key reason why single-earner families do worse from these reforms relative to two-earner families is that financial support is being switched from tax credits (which are paid to households) to income tax cuts (which are paid to individuals – and so give two-earner households double the support of single-earner households).

As the table below shows, one-child single-earner families earning £10,000 and over will all see their financial position deteriorate. For example, by April 2012, compared to April 2010:

• A one-child family with a single earner working full-time on the minimum wage (annual gross income: £12,000) will lose £79 a year;

• A one-child family with a single earner on £16,000 will lose £200 a year

Annual gross income (£)

Gain from income tax cut (£)

Gain/loss from NI changes (£)

Gain/loss from tax credit changes (£)

Loss from Child Benefit freeze (£)

Loss from VAT rise (£)

Total change in living standards (£)

             

10000

218

119

-139

-70

-147

-19

11000

218

109

-159

-70

-147

-49

12000

218

99

-179

-70

-147

-79

13000

218

89

-199

-70

-148

-109

14000

218

79

-219

-70

-148

-139

15000

218

69

-239

-70

-148

-169

16000

218

59

-259

-70

-148

-200

17000

218

49

-279

-70

-148

-230

18000

218

39

-299

-70

-148

-260

19000

218

29

-319

-70

-149

-290

20000

218

19

-339

-70

-149

-320

21000

218

9

-359

-70

-149

-350

22000

218

-1

-379

-70

-149

-381

23000

218

-11

-399

-70

-149

-411

Note that we have calculated the loss from VAT by assuming that households spend 50 per cent of their disposable income on VAT-able goods; other estimates of losses from VAT have been even larger than this.

Losses from the coalition’s major tax and benefit changes by April 2012 (compared to April 2010) for low-income single-earner families with one child. (All these figures are expressed in this year’s prices and take into account the effect of RPI inflation on tax & NICs thresholds and on benefit and tax credit rates – given RPI indexation was the default in April 2010.)

A further point about the coalition’s reforms is that by switching support from tax credits (mostly paid to households with children) to income tax cuts (paid to households both with and without children), the government are also shifting support away from families with children and towards families without children (many of whom gain from these reforms). This is essentially beginning to unwind Labour’s significant increases in financial support for families with children.

All of which leads us to pose a question; given that these huge cuts to tax credits and child benefit come on top of cuts to Sure Start and moves to scale back flexible working rights; is this the least family-friendly government ever?

15 Responses to “Is this the least ‘family friendly’ government ever?”

  1. Ash

    …and presumably the effects of coalition policies on larger families in the middle of the income distribution are even more perverse.

    Here’s a back-of-a-fag-packet comparison of two families:

    A – Two median earners on £21,000 each, three kids.

    B – One high earner on £44,000, three kids.

    With the tax threshold at £6,500, the net incomes of these families were about the same (circa £33,000). The tax threshold rises mean family A’s net income has now overtaken family B’s. Yet family B stands to lose around £2,500 in Child Benefit in 2013, while family A keeps the full amount.

  2. FairLocalContracting

    RT @leftfootfwd: Is this the least ‘family friendly’ government ever? http://bit.ly/hy0Xai by @TimJHorton & @HowardRReed

  3. John Kenzy

    RT @leftfootfwd: Is this the least ‘family friendly’ government ever? http://bit.ly/hy0Xai by @TimJHorton & @HowardRReed

  4. Double.Karma

    RT @leftfootfwd: Is this the least ‘family friendly’ government ever? http://bit.ly/hy0Xai by @TimJHorton & @HowardRReed

  5. Vicky

    RT @leftfootfwd: Is this the least ‘family friendly’ government ever? http://bit.ly/hy0Xai by @TimJHorton & @HowardRReed

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