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| Budget 2015: Poorest families will be £800 worse off by 2019, say Institute for Fiscal Studies | Budget 2015: Poorest families will be £800 worse off by 2019, say Institute for Fiscal Studies |
| (about 3 hours later) | |
| George Osborne’s “One Nation” rhetoric has been left in tatters after it was revealed that his fiscal package will leave the poorest households in Britain “unequivocally” worse off. | |
| In his Budget speech on Wednesday the Chancellor heralded his extensive welfare cuts as “fair” and suggested that the boost to incomes from his new national living wage would ultimately leave ordinary families with a higher standard of living. | |
| But the respected Institute for Fiscal Studies (IFS) think-tank said that the Budget will actually make the poorest tenth of families in the country around £800 a year worse off by 2019. | But the respected Institute for Fiscal Studies (IFS) think-tank said that the Budget will actually make the poorest tenth of families in the country around £800 a year worse off by 2019. |
| The next-poorest tenth of families will experience an even bigger loss, with their annual income slashed by £1,100. In total it is estimated that the four-year freeze on working-age benefits will cost 13 million families an average of £260 a year. Meanwhile, the richest 10 per cent of families will see their income fall by only £350 a year, while the second-richest 10 per cent will lose virtually nothing. | |
| “The changes overall are regressive – taking much more from poorer households than richer ones,” concluded Paul Johnson, director of the IFS. Child poverty is expected to shoot up over the coming years due to the welfare cuts for those on low incomes, and critics also pointed out that the majority of losers from the Chancellor’s squeeze on tax credits will be people in work. | |
| Frank Field, the Labour MP and anti-poverty campaigner who has long pushed for reform of the £30bn-a-year tax-credit system, also criticised the way the Chancellor had hit “strivers”. “Existing tax-credit claimants should have been protected and only new claimants affected” Mr Field told The Independent. “He [Mr Osborne] has strung out millions of strivers who will be made worse off.” | |
| Labour leadership favourite Andy Burnham said the first Budget from an undiluted Conservative government in 18 years showed that the “nasty party is well and truly back”. TUC General Secretary Frances O’Grady described the Budget as “a wolf in sheep’s clothing” for working families. | Labour leadership favourite Andy Burnham said the first Budget from an undiluted Conservative government in 18 years showed that the “nasty party is well and truly back”. TUC General Secretary Frances O’Grady described the Budget as “a wolf in sheep’s clothing” for working families. |
| Paul Johnson also shot down the Chancellor’s suggestion that his surprise introduction of a £9-per-hour national living wage – effectively a large increase in the statutory minimum wage – by 2020 will compensate working families for his extensive assault on the tax-credit regime. | |
| “It’s absolutely clear that increases in the minimum wage will not make up for cuts in tax credits,” Mr Johnson said, noting that the aggregate increase in employment income from the higher minimum wage will be £4bn, while welfare spending is set to be slashed by £12bn by the end of this parliament. “Unequivocally, tax-credit recipients in work will be made worse off by the measures in the Budget on average,” he added. | “It’s absolutely clear that increases in the minimum wage will not make up for cuts in tax credits,” Mr Johnson said, noting that the aggregate increase in employment income from the higher minimum wage will be £4bn, while welfare spending is set to be slashed by £12bn by the end of this parliament. “Unequivocally, tax-credit recipients in work will be made worse off by the measures in the Budget on average,” he added. |
| In the Budget, Mr Osborne took an axe to the tax-credit system in order to hit his fiscal target of eradicating the Budget deficit by 2019-20. He made big savings by slashing the earnings threshold at which tax credits start to be withdrawn from those in work and by limiting child tax credits to a maximum of two children per family. | In the Budget, Mr Osborne took an axe to the tax-credit system in order to hit his fiscal target of eradicating the Budget deficit by 2019-20. He made big savings by slashing the earnings threshold at which tax credits start to be withdrawn from those in work and by limiting child tax credits to a maximum of two children per family. |
| Together, tax-credit reductions made up just under half of the total £12bn welfare cuts that will take effect by 2020. “These changes to tax credits are not easy but they are fair,” Mr Osborne told the House of Commons. | Together, tax-credit reductions made up just under half of the total £12bn welfare cuts that will take effect by 2020. “These changes to tax credits are not easy but they are fair,” Mr Osborne told the House of Commons. |
| In a likely sign of ministerial alarm about the fact that the benefit cuts will hit the poorest hardest, the Treasury radically overhauled its regular distributional analysis in the official Budget documents, replacing the normal charts showing how each tenth of the population will lose or gain with more obscure statistical measures. | In a likely sign of ministerial alarm about the fact that the benefit cuts will hit the poorest hardest, the Treasury radically overhauled its regular distributional analysis in the official Budget documents, replacing the normal charts showing how each tenth of the population will lose or gain with more obscure statistical measures. |
| A Treasury spokesman denied the change was made because ministers did not like what the charts showed. But Jonathan Portes, director of the National Institute of Social and Economic Research, said: “It was clearly done to conceal the distributional impact of the Budget”. | A Treasury spokesman denied the change was made because ministers did not like what the charts showed. But Jonathan Portes, director of the National Institute of Social and Economic Research, said: “It was clearly done to conceal the distributional impact of the Budget”. |
| The Chancellor’s claim to have delivered a “lower-tax” Budget also unravelled as it emerged that Mr Osborne had delivered one of the top 10 biggest tax-raising Budgets of the past 25 years. His hikes on insurance premiums, divided payments and vehicle excise duty raised £6.5bn in net taxes according to the IFS, the sixth-largest cash increase in the past quarter century. “The figures are quite clear… this was a tax-raising Budget” said Mr Johnson. | The Chancellor’s claim to have delivered a “lower-tax” Budget also unravelled as it emerged that Mr Osborne had delivered one of the top 10 biggest tax-raising Budgets of the past 25 years. His hikes on insurance premiums, divided payments and vehicle excise duty raised £6.5bn in net taxes according to the IFS, the sixth-largest cash increase in the past quarter century. “The figures are quite clear… this was a tax-raising Budget” said Mr Johnson. |
| The IFS’s analysis of the Budget shows that, as well as losing out significantly in cash terms, the poorest will also take the biggest financial hit as a share of their income. The income of the least well-off 10 per cent is set to drop 7 per cent by the end of the decade while the top 10 per cent will see only a 1.3 per cent reduction in their income. |