IFS: poorest households hit hardest by coalition tax and benefit changes

Working parents in the poorest households have been hardest hit by changes to the tax and benefits system since 2010

Working parents in the poorest households have been the hardest hit by the coalition’s changes to the tax and benefits system since 2010, according to new analysis by the Institute for Fiscal Studies (IFS).

Household incomes have been reduced by £1,127 a year on average as a result of tax and benefit changes made by this government, with low income households losing the most as a proportion of their income.

The report, published today, said that:

“Tax and benefit changes introduced by the coalition have reduced household incomes by £1,127 a year or 3.3 per cent on average.”

“Low-income households with children lose the most as a percentage of their income from changes implemented by the coalition.”

“For middle and higher income families with children… loss of tax credits and child benefit has more than offset the effect of income tax cuts.”

The study looked at the impact of the increase in VAT to 20 per cent, higher personal tax thresholds as well as a range of benefit cuts.

Tax and benefits(1)

While the report said that not all losses could be attributed to specific households, those which could amount to an average loss of £489 per household a year, made up of an average gain of £321 a year from cuts to direct taxes, a loss of £333 a year from increases in indirect taxes and a £477-a-year loss from benefit cuts.

Labour shadow treasury minister Cathy Jamieson MP called the figures a “clear betrayal of [David Cameron’s] promise to lead the most family-friendly government ever”.

“For all the government’s claims, this report shows that they have raised tax by over £13.5 billion a year. And for millions of working people the rise in VAT and cuts to things like tax credits have more than offset changes to the personal allowance,” she said.

“The Tories are now promising to cut tax credits again for millions of working families and refusing to rule out another VAT rise to pay for their unfunded promises. It’s clear working people can’t afford five more years of this government.”

James Bloodworth is the editor of Left Foot Forward. Follow him on Twitter

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One Response to “IFS: poorest households hit hardest by coalition tax and benefit changes”

  1. robertcp

    The people that have done best from the last five years are middle aged property owners on slightly above average incomes. People like me! To be honest, a left of centre government should not change that but benefits should be increased, VAT cut and taxes on the rich increased.

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