Budget 2013: Who has lost the most and the least?

Chart showing impact of tax and benefit changes by income group

The chancellor may find himself looking in the Budget for some extra sources of money for the government, to try to trim its borrowing.

If he does, it would make sense for him to look at who has taken the biggest hit so far.

It is possible to look at the impact of all the measures announced so far covering the period between the government coming to power in 2010 and the end of the tax year 2015-16, as the Institute for Fiscal Studies (IFS) has done.

"The chancellor has said that those with the broadest shoulders should bear the biggest burden of any further consolidation," says Paul Johnson, director of the IFS.

Paul Johnson, director of the IFS, says the Budget may target those with the most wealth rather than the highest incomes.

"It is fair to say that up till now the highest-income people have, since January 2010, seen the biggest increases in tax, by some considerable distance actually."

Indeed, IFS figures show that taking all the tax and benefit changes announced so far for 2010-16, the people with the top 10% of incomes will see those incomes drop by 7.6% on average.

Those on the highest incomes have been hit by measures such as the loss of the tax-free allowance for people earning above £100,000, loss of child benefit for higher earners and restrictions on how much they can contribute tax-free to their pensions.

In percentage terms they have lost considerably more than the next worst-hit group, which is the poorest 10%, who are expected to see their incomes drop by 4.9%.

So on this analysis, there is little sign of the so-called squeezed middle. Those with incomes above the bottom 10% and below the top 10% have benefited from the increases in the amount they can earn before they have to pay any income tax, even if they have suffered from their wages failing to keep up with rising prices, which is not reflected in these figures.

Budget 2013 graphic

The chancellor will give his fourth Budget speech on 20 March at 12:30 GMT

There is full coverage of the Budget and how it affects you on the BBC News website

You will also be able to watch the event on a special programme on BBC Two and the BBC News channel from 11:30 GMT

"If you look at the groups who have been less affected, it is actually those in the upper-middle bits of the distribution, perhaps basic rate taxpayers, where you have a couple who are both earning, particularly those without children," Mr Johnson says.

"They've not been very much affected at all by the tax increases we've seen so far, so he [the chancellor] might decide to go for that group, though electorally that would be difficult."

Households on the lowest incomes have been disproportionally hit by benefits to people of working age and tax credits being raised by less than the rate of inflation.

Of course, income level is not the only way to consider the effects of tax and benefit changes - the IFS also considered types of households.

Chart showing impact of tax and benefit changes on various groups

Clearly it would be tempting to try to get couples with two earners and no children to take on more of the burden, although technically it might be difficult to do so.

Niel Fort, from Bolton

"I'm an unemployed warehouse worker and have been on jobseeker's allowance [JSA] for over a year.

"The cap on welfare rise is a joke because I receive only £50 a week... to feed myself, pay gas and electric, which I cannot afford to do.

"I struggle all the time and yet I am on JSA, which is the benefit for being available for work, fit for work and actively seeking work."

In this analysis, pensioners are among the least hit groups, with a single pensioner's income falling an average 2% and a pensioner couple down 2.3%.

There have been calls for wealthy pensioners to be taxed more, although that would also be politically difficult.

Last year, a report from the Free Enterprise Group of Conservative MPs called for ministers to be "brave enough" to tell the wealthiest pensioners that their benefits would be cut.

They suggested doing things such as taxing winter fuel allowance or even removing it from pensioners who are higher-rate taxpayers.

The chancellor may also decide to ignore income and go for a different group instead.

"He may decide to look at those who have got high levels of wealth, which is actually a bit of a different group to those who have high levels of income, so a mansion tax, for example, for those who have very expensive houses, or looking through things like inheritance tax or capital gains tax," Mr Johnson says.

The idea of a tax on properties worth more than £2m came from the Liberal Democrats, although it is not part of the coalition agreement, but it has now been adopted by Labour.

A vote on it was defeated in the Commons last week.

So, the groups hardest hit by changes in taxes and benefits are those with the highest 10% of incomes followed by the lowest 10%.

The hardest hit types of households are those on working-age benefits, with four of the top five categories being households with nobody working.

Pensioners and working households without children have been hit relatively less hard.


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  • rate this

    Comment number 281.

    I am disabled and unable to work currently, from next month I am £15 per week worse off, i used to be on £71 per week, i don't get by on what i have now, i do not understand how i am meant to get by from next month, why am i paying for this banking mess? I was injured at work and haven't worked since, can't walk properly and was told last month i am not disabled enough to warrant any extra help!

  • rate this

    Comment number 280.

    were all taking a hit
    so get over it
    some of us have always been hit and take it in our stride.
    it is nice to see benefits affected for a change
    now I am starting to believe we are all in it together
    I predict
    Chris Greying as the next PM

  • rate this

    Comment number 279.

    244. Mark_from_Manchester

    I don't think Labour deliberately used immigration that way. It was more a lack of understanding and competence, coupled with deliberate confounding of the system by immigration staff. Labour only started to get a rational grip in its last 3 years.

    The Tories however are deliberately encouraging an imbalance of immigrants in favour of the unskilled.

  • rate this

    Comment number 278.

    Looks like the NHS is suffering from austerity, the dark side of me says it is politically planned, but they couldn't be that evil could they?

  • rate this

    Comment number 277.

    My life would be very hard if I didn't live with my very kind mother. I see that my 43.5% drop in income on Incap. doesn't seem to be represented. Perhaps I am a Soviet style non-person?

    IDS is just a cruel lier (check his "degree", "education" and expenses for his wife! To get a job a need most a reference. These days there doesn't even seem to voluntary work available to do that!

  • rate this

    Comment number 276.

    EVERYBODY has lost from this austerity regime imposed by the government

  • rate this

    Comment number 275.

    People on JSA etc complaining about having " only" £50 a week to live on, there are working people like me in the real world, who don't get the rent paid for them and who pay full price for everything. . Having £30 left after bills to me is living a life of luxury- or are my priorities different?

  • rate this

    Comment number 274.

    We should all stop this continual whingeing and get off our ballooning fat backsides and take more responsibility for our own personal and family finances. There are many, not all by any means, who are able and should get out in the world and try and make Britain great again by earning a place in the global economy.

  • rate this

    Comment number 273.

    It's not austerity that is the problem, it is previous governments spending far more money than we have coming in. Borrowing should be emergency only, if you can't afford something you can't have it, simple as that.
    So now, when we need the money it is going on interest payments.

    We'd all like to funs every worthy cause on the planet but we have to choose which charities we support.

  • rate this

    Comment number 272.

    As a pensioner, these figures don't reflect reality. The fall (and ongoing falls) in savings interest rates have hit me really hard over the last four years. The savings themselves are being devalued. Furthermore the ending of the post 65 higher personal allowance (the 'Granny Tax') is increasing my income tax payments significantly from April. The ConDems are hitting the most vulnerable most.

  • rate this

    Comment number 271.

    I'm sick and tired of hearing people say their should be Robin Hood taxation.

    I'm in the lowest earning bracket, but have the attitude that people should keep most of what they earn. People who could work and don't anger me far more than the super rich, as one group is a leech on our society, the other at least will contribute somewhere along the line, even if it isn't in income tax.

  • rate this

    Comment number 270.

    251 Acet

    '... subsidized with our money, rewarding those that OWN the most capital.'

    The big lie is blaming 'the banks'.

    Everybody seems willfully blind to the fact that it was we, the people, who borrowed all that cash in the first place and that 'bailout' is underwriting the ludicrous value of OUR over-priced houses. Yours and mine.

    We're using OUR money to prop up OUR house prices.

  • rate this

    Comment number 269.

    Someone on £1m a year loses £76k, gets a tax cut of £109k so is actually £33k better off. My severely disabled daughter who needs 24 hour care gets a benefit rise of £1.20p per week but the council demand her rent contribution goes up by £3.10 (25%) per week as she is the third adult in the property, the other two being her pensioner parents who have saved the council about £1.2m by caring

  • rate this

    Comment number 268.

    As with many of these so-called "experts", they only look at part of the picture. Artificially stifled interst rates have hit pensioners, who rely on savings to augment meagre pensions, extremely hard. That has to be taken into consideration. Austerity has hit savers to help borrowers. No solution for getting out of this economic mess. I'd say it's actually a disincentive to ever be thrifty.

  • rate this

    Comment number 267.

    95empiredown -"The government need to hit the old. The costs of a ageing population needs to be nipped in the bud before they get out of hand. The old, for the most part, are never gonna be useful economic contributors.."

    What do you think 'the old' did from 15\16 years of age to 60\65?

    Did they not work, pay Tax? Did they not pay for your mother's Maternity Care and your Education?

  • rate this

    Comment number 266.

    I don't trust the graphs. Bill Bailey would have played a better tune on those keyboards than the analysis by the business reporter of this piece.

    Costs of basics are escalating. Food, accommodation, water, gas, electricity. Taxes are up - higher VAT and still more stealth taxes than you can shake a tax-payer funded MP/MEP/Lord/Lady/MSP salary/allowances and expenses files at.

  • rate this

    Comment number 265.

    @171.Andrew Morton
    The other thing to bear in mind is that relative effects of these drops. If a footballer is on £100k a month then a 7% drop is a lot in absolute terms

    Well, if we cut benefits, the claimants won't buy SKY sports, SKY then won't pay footballers £Million's for their bad acting skills on the pitch anymore.

  • rate this

    Comment number 264.

    We really need to see the richest 10% split out - I have an uncomfortable feeling that the top 1% have lost less than those at the bottom of the top 10%. Loss of child benefit, increased stamp duty etc. really has no impact on the super-rich.

    The richer you are the more likely you are to employ some very sophisticated tax accountants - who will earn their corn.

  • rate this

    Comment number 263.

    Utilties should have a profits cap, prices have spiralled 2 quickly for 2 long. Bonuses could pay a higher rate of tax paid on a sliding scale. No bonuses should be paid that are higher than the annual income of the company's lowest paid full time worker. I am in a 2 x worker hosehold we both have 2x jobs we pay 2x tax and claim no benefits.

  • rate this

    Comment number 262.

    @234 I agree. I paid over £24,000 tax last year, but could easily have paid less. I'd happily pay more if others in my situation practised less, perfectly legal, tax avoidance. In the mean time, let's just increase the higher rate to 45% to show solidarity with the top decile.


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