Poorest Families to Suffer in Emergency Budget

Councils could be hit desperate pleas for support from Britain’s poorest, if predictions by the country’s top tax experts come true.

Analysis of the emergency Budget by the respected Institute for Fiscal Studies, warned it would disproportionately hit the poorest through changes to taxes and benefits such as disability living allowance and tax credits.

It predicted the bottom 10% of households would lose 5% of their income and concluded the overall effect of the new reforms announced in the June 2010 Budget is regressive.

The IFS explained households in the lowest bands spend more than their income and hence the amount they lose from increasing VAT is high as a percentage of their income.

The report comes in the same week as both business leaders and a Bank of England adviser warned public spending cuts would put the fragile economic recovery at risk.

The IFS said: ‘Low-income households of working age lose the most from the June 2010 Budget reforms because of the cuts to welfare spending.

‘Those who lose the least are households of working age without children in the upper half of the income distribution. This is because they do not lose out from cuts in welfare spending and are the biggest beneficiaries from the increase in the income tax personal allowance.’

The Treasury rejected the IFS claim: ‘The Government does not accept the IFS analysis. It is selective, ignoring the pro-growth and employment effects of budget measures such as helping households move from benefits into work, and reductions in corporation tax.

‘It is essential that policy is informed by transparent analysis. That's why we stand full-square behind our budget analysis which is based on what can accurately and completely be measured.’

Source of this Article:

Local Gov (opens a new window)

By Heidi Rees (Bournemouth 2026 Partnership)

Posted: Thursday 26 August 2010

Permalink: http://www.bournemouth2026.org/poorest-families-to-suffer-in-emergency-budget

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