The June 2010 Emergency Budget set out a number of tax and benefit changes to be introduced by 2014-15.
For the first time, the Budget documentation contained distributional analysis of the changes by household income, which showed that the measures to be introduced between June 2010 and April 2012 were progressive relative to household income, and in his Budget speech the Chancellor used this as evidence that it was a ‘progressive Budget’.
In their post-budget briefing, the Institute for Fiscal Studies cast doubt on this claiming that many of the progressive tax rises that will be introduced over the next two years were announced by the previous Government, and that the Budget measures scheduled to come in between 2012 and 2014 would be generally regressive.
Moreover, the distributional analysis in the Budget documentation did not include the effects of some cuts to housing benefit, Disability Living Allowance and tax credits that are likely to affect the poorer half of the income distribution more than the richer half.
James Browne, senior research economist at the IFS, told the Today programme that measures coming into effect in 2012-2014 and changes to housing benefits, disability living allowance and tax benefits will mean the “poorest tenth of the population will lose more as a percentage of their income than the richest tenth”.
Mr Browne added it was “very difficult to see” how the combination of 20% tax rises and 80% spending cuts could not affect the poor more than the rich.
The report in brief
The full report
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I suppose Karen Buck MP and Simon Hughes MP will have a lot to say about this. See our previous posting.
As far as providers are concerned; careful attention needs to made to ensure that in-work calculations are effectively and correctly undertaken and that claimants are clearly advised of the parameters of receiving their benefits and the level of participation required!!
