New analysis also says that the pace of cuts will be faster this time
Today the Institute for Fiscal Studies (IFS) released analysis of the tax and benefit proposals of the two main parties. It found, again, that it will be low-paid families with children who are hit hardest by Conservative plans.
According to the IFS, ‘the biggest winners from the Conservatives’ income tax proposals would be those with incomes between £50,000 and £150,000’, while ‘it is highly likely that the poorer half of households would lose overall from the Conservatives’ proposals’. This is largely because the Conservatives are planning the biggest cuts to benefits out of all parties.
Although the Conservatives have not yet specified details of their benefit cuts, the IFS warned that their proposals ‘would almost certainly require significant cuts to some of the main benefits – child benefit, housing benefit, tax credits and disability benefits.’
Some of the ways the IFS suggested the Conservatives might reach their cuts target are:
- Abolishing child benefit and compensating low-income families through universal credit
- Reducing the child element of universal credit by 30 per cent to reach its 2003–04 level in real terms
- Making all housing benefit recipients pay at least 10 per cent of their rent
Today’s report predicted that overall, the distributional impact of the Conservative proposals would be the same as in the last parliament, with poorer households losing, and the upper-middle of the income distribution doing the best. The very richest will do less well.
But the IFS said that the pace of cuts would be faster than in the last government, and would require cash reductions rather than just freezing benefit rates. These reductions, it predicted, will ‘predominantly affect households towards the bottom of the income distribution.’
It is important to note, as the IFS did, that the Conservatives’ proposals would do little to alter the overall structure of the tax and benefit system, leaving its fundamental problems unaddressed. However it added:
“Unfortunately, what we do see in the Conservative manifesto are more examples of Mr Osborne’s tendency to complicate the tax system: the proposals would needlessly complicate the inheritance tax system, and add more complexity and instability to the taxation of pensions for better off individuals.”
Commenting on the IFS report, TUC general secretary Frances O’Grady said today:
“The IFS report shows that the Conservatives will cut taxes for the better off, and fund it with cuts to benefits and tax credits for the very hard-working families they claim to champion.
“With one in five earning less than the living wage, millions of working people depend on a proper welfare safety net to make ends meet.
“This is not dealing with abuse, it’s ripping the heart out of a welfare safety net that any of us might need.”
Ruby Stockham is a staff writer at Left Foot Forward. Follow her on Twitter
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