Friday, 23 January 2015

Poorest families lost £1,223 a year

Lower income households have lost the greatest share of their incomes from the austerity years under the Coalition, but the richest households have lost the most in cash terms.

That's what the Institute for Fiscal Studies concludes in its verdict on the Coalition in the run-up to the election.

It's the first time it has measured the impact from May, 2010.

So how much have households lost?

Lower income households have been hit by a squeeze on benefits and some tax changes have affected the better off . The people affected know that already.

The average loss since the Coalition came in is £489 a year, according to the IFS model.

The biggest losers in cash terms are the top 10 per cent. Focusing on families with children on incomes more than about 70,000 pounds, they have lost £5,350.

But at the other end of the scale families with children in the bottom 10 per cent have lost £1,223 on average. They're likely to have incomes less than around 20,000.

In the middle and slightly higher than middle income groups, households have lost a lot less. In fact those those without children have actually gained.

For those who have lost out, what changes are behind that?

Everyone's affected by higher VAT.

But lower income families have less than they might have expected because benefits have been uprated by a lower figure after the switch to the Consumer Prices Index or CPI.

And they have less and because of cuts to housing benefit and council tax benefit. The freeze on child benefit is a factor too.

Big increases in the Personal Allowance (the amount you can earn before you start paying income tax) have helped middle earners a lot.

But households at the top end are paying higher National Insurance. More of them are in the 40 per cent tax bracket. And tax relief on their pension contributions has been restricted.

What if you extend the time frame to before the Coalition came in?

Interesting this - going back to before May 2010.

Including the austerity measures Labour brought in in in April 2010, the losses pile up for the better off.

And taking the time frame bacl to 1997, when Labour got in, the picture looks better for those on the lowest incomes.

Because Labour introduced more generous benefits for the poorest families and those with children, those groups are still better off -- according to the IFS -- than they were before the Blair/Brown era.

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