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. 

   Mr. Sensible

   March 28, 2011

   Tim and Howard, further to that, given what members of Netmums recently said about changes to tax credits, how does all this fit with trying to make work pay?

2. Kevin Richards

   March 28, 2011

   "Figures dont lie" – RT @leftfootfwd: Is this the least ‘family friendly’ government ever? http://bit.ly/ezSXSY

3. Daniel Pitt

   March 29, 2011

   Is this the least 'family friendly' government ever? http://bit.ly/hy0Xai #ConDemNation

4. 

   Jason Bates

   March 29, 2011

   The unfairness of two lower wages returning more in tax/credit/benefit entitlement then a single wage of the same value to the same household existed through the entire 13 years of the Labour government (household with 2 x 30k earner taxed at standard rate on entire of income – single earner of 60k taxed at 40%).

   This isn’t an anomaly invented by the coalition and people need to be careful not to suggest it is or be rightly accused of hypocrasy.

   These measure do EXACERBATE the existing unfairness though – and chucking stones at that is fair game.

5. goLookGoRead

   July 20, 2011

   http://t.co/wzdPZ8Y – 1-child single-earner families on £10K a yr, by 2012, will see their financial position deteriorate [see comp table]

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