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
    -2

    Comment number 301.

    292 Spaced One

    No doubt another middle income earner who is a grand total of 2% worse off generously suggesting that those who have already contributed 7.5% contribute more.

    For the poor. Because you're so generous. And they, the poor, deserve it. Although not out of YOUR pocket obviously. After all, at 2% YOU'VE done YOUR bit. YOU need every penny YOU can get. Because of the 'cuts'.

  • rate this
    +1

    Comment number 300.

    In the sphere of taxing wealth, I'm a bit surprised that this reforming government hasn't started a revision of the council tax bands. Owners of large properties pay a smaller ratio of the property's value in council tax than owners of small properties.

    Local authorities would be less dependent on funding from central government, and there would be more money for schools, hospitals and roads.

  • rate this
    +3

    Comment number 299.

    271. "the other at least will contribute somewhere along the line," I worked in the NHS and got a strangulated hernia doing it hence Incap. News to me that I did nothing "along the line"!

    Mother pointed out the other day that many disabled people with an extra bedroom have and need modified accom, so costs to the taxpayer will rise if they have to move (bedroom tax!).

  • rate this
    +4

    Comment number 298.

    QE has effectively wiped out the value of money! Taking inflation into account, interest rates are already negative. This is the real drag on the economy and is the new normal until the current debt crisis is over. QE just prolongs the agony - the banks should be allowed to fail and the debt written off. Then everyone can get back to productive work!

  • rate this
    +1

    Comment number 297.

    Austerity is the governments word for having to find a solution.
    The problem with their solutions to all issues is their other word....TAX.!!!

  • rate this
    +2

    Comment number 296.

    BBC'S ROLE IN THE UK

    The job of the BBC is to train the population to expect the kind of abuse we have had from the Banking industry and the nation's richest.

    We have all paid to prop up their failing businesses whilst they pay themselves millions upon millions, again and again. No shame.

    The BBC's job is to massage the news so that our masters can carry on as they please.

  • rate this
    +1

    Comment number 295.

    Immigration effects are entirely dependent on time and place..

    Business cycle

    Skills of immigrants

    Skills of host workforce

    Do the skills of immigrants complement or substitute existing workers

    Existing job sector or new industry

    Short or long run immigration

    Wages ?..dependent if you take average wage or different group of workers along the wage curve

    Statistics nous ?

  • rate this
    -14

    Comment number 294.

    291. Rick

    You said it - EARN

  • rate this
    +2

    Comment number 293.

    @256.Ppuj

    "PFI" projects boost employment & improve infrastructure.
    "Labour were in government when the Bankers lost OUR shirts." Lehmann Brothers? American Sub Prime Mortgage crisis? Labour's fault? Get real.
    "falling tax revenue ...cuts to the public sector. " Do you not see a contradiction here?
    "wealth creators." Need us to have money to spend on their products.

  • rate this
    +4

    Comment number 292.

    4.9% for the poorest, who are already living hand to mouth, is a hell of a lot worse than 7.6% for the richest, for the whole only effect will be a slight reduction in the amount they put into bank accounts and leave to accumulate interest. The richest only face 7.6% because of the tax increase Labour introduced anyway. The cost of deficit reduction should not decrease the richer you are.

  • rate this
    +3

    Comment number 291.

    And let's not forget, if you earn over half a million pounds a year, you get the biggest income tax break in the country, under the new rules from April, an extra £17,000 before paying tax. Absolutely disgusting.

  • Comment number 290.

    All this user's posts have been removed.Why?

  • rate this
    -3

    Comment number 289.

    Which part of the Tories did people not understand. These changes are not accidental nor are they fair. Cuts for the poor, sick, elderly and disabled is what they do every time they are in power,

    Look up the story of the frog and the scorpion. The Tories are the scorpions!! http://en.wikipedia.org/wiki/The_Scorpion_and_the_Frog

  • rate this
    0

    Comment number 288.

    Public sector workers. A 15% reduction in wages through pay freezes (and oftentimes more if pay was cut as in my case), on top of all the rest of it.
    And lets face it, the salary of the majority of public sector workers is a joke (though top salaries and politicians need massive pay cuts I'll agree).
    But thats ok, its not like we do anything important, like keep society functioning or anything..

  • rate this
    +3

    Comment number 287.

    There seem to be a lot of comments bemoaning how little people on benefits get paid. I don't get it, because to me getting paid is something that happens after you've done something to deserve being paid.
    Be grateful that you live in the UK with your 'free' money and housing etc, or get yourself work that pays more than benefits. (Those genuinely seeking work excepted - you have my support)

  • rate this
    +3

    Comment number 286.

    Recently my hours at work increased, great I thought, more income, less rationing of heating, less horse meat for dinner :)

    But no! the increased income due to hours worked has led to a greater cut in working families support! Overall a lower income and MORE rationing in the house.

    Why did I bother?

    Oh and we don't drink, smoke or have a TV. So not too many luxuries to cut here.

  • rate this
    +1

    Comment number 285.

    My husband and I both work full time in low paid jobs. I am studying for a degree to better my lot in life. We rent and so we cannot afford a deposit on a house. We cannot afford children- we have no spare income to bring up a child. We get no help because we work full time. We struggle to pay for heating, electricity and food. And some people just get hand outs because they can. Sickening.

  • rate this
    -1

    Comment number 284.

    Sidney 259. You are merely commenting on the injustice in this world with a bitter twist. I am trying to make a realistic point. Drug dealers, file sharers, fishing sites, fake goods seller, vat scam players and fraudsters earn a lot of money and there are a lot of them out there.

    Your comment is just bitter towards the better off than you. IMHO.

  • rate this
    +2

    Comment number 283.

    254. penguin337

    I think you'll find it's the Lib Dem's who keep blocking moves to restrict immigration even further or remove the Human Rites Act that prevents our borders from being properly policed.

    But nice attempt to try and shift the blame from Labour onto the Tories to reaffirm your anti-capitalist core beliefs. Capitalists may have benefited but this one was all the Lefts work.

  • rate this
    +3

    Comment number 282.

    It's weird that folk...not just here but across Europe look upon what we call "austerity" as some sort of cruel trick, a lifestyle choice imposed upon them by some heartless "other".

    But we have spent all our money...we've even stolen our children's money. We've got fat on millions of Chinese workers willing to work, until now, on $2 a day. The fat lady is already singing but we don't listen!

 

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