Middle-income childless couples have been the biggest beneficiaries of the current government’s taxation and welfare policies since 2010, according to analysis by the Institute for Fiscal Studies (IFS).
The report said that tax and benefit changes meant that households were on average £1,127 worse off now than they would have been had the Tory-Lib Dem coalition made no changes when they came to power in May 2010.
The IFS worked out that they could see how much different types of households were affected by £489 of that £1,127. This works out as an average losses of £333 from increases in indirect taxes such as V.A.T. and £477 from benefit cuts. This was partially offset by an average gain of £321 from cuts to direct taxes.
Those are the averages but what does that look like when broken down into those different types of household...
The only household type to have tangibly benefited from these measures is the childless couple with two earners. This is largely because there were few specific benefits for them to lose. This is particularly true of middle-income households of this type, who the IFS says have benefited “significantly” from the coalitions’ large increase in the income tax personal allowance.
The report explains further:
Households with children lose out because they have greater entitlements to benefits than those without and because entitlement extends to higher income levels for those with children. Furthermore, a number of benefits directed at families with children have been reduced (notably, through freezing child benefit, the high-income child benefit charge and means-testing child tax credit more aggressively).
While the biggest losers in cash terms were the top 10% of earners, it is the poorest that have seen the largest fall as a proportion of their income during the current government’s term in office.
As the chart above shows though, the top 10% have been contributing a bigger slice of their income than middle-range earners. The “squeezed middle” has actually been the least badly hit by the government’s programme.
It is also worth pointing out here that the IFS also looked at how much each group would have lost if the base date was pegged back to January 2010 rather than the start of the coalition government’s term in May.
Under that time period, it is actually the top 10% who have seen the biggest proportional impact (as well as losing the most cash overall). The IFS say this is largely because the austerity programme (Labour’s initial proposals) started to get into full swing in April of that year.
