It's easy to overlook a press release from the Liberal Democrats, but yesterday they issued some figures that reveal very clearly who's gained most from the VAT cut. No prizes for guessing; it's the rich.
Actually, it's a bit more complicated than that, and it depends how you slice the figures. In response to parliamentary questions, the Treasury minister Stephen Timms released figures showing how much different groups save as a percentage of their total income from the cut in VAT to 15%.
Viewed from this angle, the VAT cut looks progressive. The poorest 10% of households save the equivalent of 1.6% of annual income, while the richest 10% save 0.5% of annual income.
But Timms did not turn these percentages into cash figures in his written answers. The Lib Dems have taken the percentages, cross-referenced them against information from the Office for National Statistics giving the annual household income figures decile by decile and, as a result, produced a chart that is much more meaningful.
You can read the full details of how different groups benefit from the VAT cut here (excel spreadsheet), but these are the highlights:
The poorest 10% of households save: £145 a year on average, or £360m in total.
The 2nd poorest save: £150 a year on average, or £373m in total.
The 3rd poorest save: £168 a year on average, or £418m in total.
The 4th poorest save: £183 a year on average, or £455m in total.
The 5th poorest save: £206 a year on average, or £512m in total.
The 6th poorest save: £239 a year on average, or £595m in total.
The 7th poorest save: £297 a year on average, or £737m in total.
The 8th poorest save: £358 a year on average, or £888m in total.
The 9th poorest save: £382 a year on average, or £950m in total.
The richest 10% save: £472 a year on average, or £1.2bn in total.
So the richest 10% are gaining more than three times as much, in cash terms, as the poorest 10%.
Jeremy Browne, the Lib Dem Treasury spokesman who put out the figures, commented: "The government's defence of its wasteful VAT cut continues to unravel. Its benefits have been overstated and most of the money is not helping the poorer households that are struggling in the recession.
"This ineffectual VAT cut is costing £1bn a month. Ministers should scrap it immediately and spend the money on transport and environmental projects which would boost the economy, create new jobs and leave a lasting green legacy for Britain."
