Think tank condemns coalition welfare reforms as poorest households hit hardest

Britainís most financially vulnerable households have been hit hardest by the coalitionís welfare reforms, with the scrapping of number of benefits hitting children the hardest, according to a think tank.

Data from the Institute of Fiscal Studies (IFS) shows that reforms enacted since 2010 have cost households an average of £1,127, despite claims made by the Chancellor in his autumn statement that those with the means to do so are bearing the brunt of the public deficit.

The damning figures have provided Labour with some much needed political ammunition in the face of bad press coming from the rallying energy suppliers due to Ed Milibandís threat to freeze prices if elected.

Cathy Jamieson, a shadow Treasury minister, said: ìFamilies with children have been hit hardest of all by David Cameronís choices – a clear betrayal of his promise to lead the most family-friendly government ever.

Taking into account the abolition of a number of child tax credits & housing benefits alongside the consumer impact of a VAT rise to 20%, the study concluded that incomes of the lowest 10% earning households have fallen by 4% since 2010.

Particularly stark is the disparity between households with children and those without, with families with one child losing out on £650 and those with two children losing almost double, whilst couples with no offspring have enjoyed a net gain of £199 since 2010. Although, this is in part down to childless households receive few benefits by comparison with those with offspring.

Due to sizeable increases to the income tax allowance, middle-income earners are the biggest winners of the Coalitionís welfare changes, especially those without children. They were also not subjected to heavier income tax rises which affected Britainís top earners.

James Browne, research economist at IFS, said: ìLow-income households with children and the very richest households have lost out significantly from the changes as a percentage of their incomes. Increases in the tax free personal allowance have played an important role in protecting middle-income working-age households, meaning that those without children have actually gained overall.î

Whilst the richest households still endured a 2.6% hit to their average incomes, mainly down to reforms made to their pension tax contributions and being subjected to higher national insurance rates, the IFS noted that the wealthy wouldíve been hit hardest if the effect of the previous Labour governmentís introduction of a 50p top tax rate was included in their calculations.

Cathy Jamieson, shadow Treasury minister, seized the opportunity to sling some mud at the Conservative party, stating: ìFamilies with children have been hit hardest of all by David Cameronís choices ñ a clear betrayal of his promise to lead the most family-friendly government ever.î
She added: ìFor all the governmentís claims, this report shows the coalition has raised tax by over £13.5bn a year. And for millions of working people, the rise in VAT and cuts to things like tax credits have more than offset changes to the personal allowance.î

Worrying indeed for low-income households is the Chancellorís pledge to not raise income tax thresholds further, with further benefit cuts a likely outcome in order for any future coalition government to reduce the UKís deficit.

However, the Treasury showed indifference to the news, with a spokesman stating: ìTodayís report from the IFS confirms that the richest have lost the most from the governmentís changes to taxes and welfare.

ìTreasury analysis has shown throughout the parliament that the richest 10% of households have made the largest contribution to reducing the deficit.

ìThe Treasury presents the most complete, rigorous and detailed record of the impact of this governmentís policies on households. At the autumn statement this confirmed that the richest 20% of households will contribute more to reducing the deficit than the remaining 80% put together.

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