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 421.

    399.Jaw dropping truth

    "...the money is stolen from the sweat of the worker..."


    If you're going to claim to tell the truth, I think you owe it to yourself to use words in a way which accords with their accepted definitions. Tax is not theft on this basis. No matter how much you, or any number of others want it to mean this, it will not change that fact.

  • rate this

    Comment number 420.

    I genuinelly feel sorry for those on JSA seeking work and £50 pw is not enough to survive.

    I propose that everyone on basic wage pays no income tax or NI and that those on benefits get 50% of the minimum wage but must turn up at a JSA site and work all day at getting a job. We need to create jobs and people need to turn up for work Pride comes before a fall - unfortunately we have fallen.

  • rate this

    Comment number 419.

    The recalibration of the benefits system is long overdue and supported by a high proportion of the population. It follows that the comparisons between 2010 and 2016 are very dubious except as a very broad brush or to make a political point.

  • rate this

    Comment number 418.

    All this shows is

    1 The condems dont think they need the poors vote...
    2 Try and keep the mid section happy and get theyre vote...
    3 The rich will predominantly always vote Conservative...

    Its about keeping themselves in power,it could also be construde as a type of social engineering.If the middle classess cant keep up theyre mortgage payments they dont know how to budget and spend too much...

  • rate this

    Comment number 417.

    Spending cuts are not about deficits but about rolling back the welfare state.

    Cameron is a dogmatic Thatcherite evangelist and a talented propogandist and tactician, which is why the middle middle class are left unscathed...

  • rate this

    Comment number 416.

    Very wealthy people thought by the governments of the day to be essential as economic playmakers given huge tax breaks, people regarded as driving the economy whether they work or not. A massive rump of people have become fecklessly addicted to not working relying upon welfare, others suffering redundancy.A third band of middle income earners are expected to support both these groups.It's wrong!

  • rate this

    Comment number 415.

    Those hard workers going the extra mile to improve their lot and help the country prosper, very quickly find over 70% of their hard graft is sucked dry (higher rate tax, VAT,red tape,etc) by politicians wanting to bribe an electorate who feel that everything is about entitlement, entitlement, entitlement.

    Until that changes, economic recovery has no chance.

  • rate this

    Comment number 414.

    399. Jaw dropping truth

    The jaw dropping truth is that capitalism is based on the sweat of the workers, slave trade, colonialism and the theft of property. Where's all the gold and minerals? Not in the uk. Who owns it all? The multinationals, not the indigenous populations.

  • rate this

    Comment number 413.

    398. jgm2

    Many years on and yet you people STILL bring the Labour Government into otherwise sensibile debates.

    Yes, they made a lot of mistakes, but we are talking about the current government now. Current affairs not history.

    We might as well use the Thatcher Government as a trump card in any future debates surrounding the Housing Crisis.

    Grow up.

  • rate this

    Comment number 412.

    399.Jaw dropping truth
    Nonsense. What you are advocating is an 'every man for himself' and a 'dog eat dog' attitude which is best left in the past. The quality of a modern democratic society is measured by how it cares for it's weak and vulnerable members.

  • rate this

    Comment number 411.

    If there are any more wealth taxes, Labour politicians won't be able to afford their kids' public school fees

  • rate this

    Comment number 410.

    @294 Sue
    EARN it, perhaps like Good old fred the Shred, Diamond Bob and not just the bankers hows about the Utilities where the hardes things to do are how much to increase the cost to the public and how much to reward yourself for making money.
    Too many are in receipt of vast amounts of money that is "earned"

  • rate this

    Comment number 409.

    rx2315, Specialist like greece have?

    It's as much our fault, as it is a battered wife to her husband.

    I suggest you turn away from the MSM and self educate on the subject. Could save you some embarrassment.

  • rate this

    Comment number 408.

    The Osborne doctrine: In a time of austerity caused by the greed and incompetence of bankers, two rules must apply for the benefit of the nation.
    1. Working people must be forced take a wage cut.
    2. Bankers must not be forced take a wage cut.

  • rate this

    Comment number 407.

    Not only the cost of living but the cost of leaving has also gone up. The people belonging to the lowest ladder and the sick, the infirm, the disabled and the pensioners are the worst sufferers when it comes to austerity measures.

  • rate this

    Comment number 406.

    What your chart does not show is how the very richest avoid paying tax. The the steep line on the 'rich' section of the chart does not actually happen.

    In other words this government 'of the rich for the rich' are taking from the poorest in society.

  • rate this

    Comment number 405.

    396. Jean

    Us too. But have you asked the question - Does the nation need the subject your kids are studying or is it more like they are choosing the subject because they like it. We had to make the choice between career investment or hobby for our kids. I suspect this is a question many parents don't ask but expect society to give graduates jobs whatever subject they choose and at grad salaries

  • rate this

    Comment number 404.

    Just goes to show "we are (not) all in it together".

  • rate this

    Comment number 403.

    I earned approx £100k last year and paid more than £50,000 tax and NI.
    I should have people queuing up at my door thanking me rather than this current bitterness towards anyone who has worked hard. A bit of credit please!

  • rate this

    Comment number 402.

    Why are we showing these data as a percentage?

    Surely a 5 % cut for someone with only £70 a week is signifiantly worse than 7 % for someone earning £700,000 a week.

    Even ignoring this poorly presented information it's horrible to see that the second highest percentage loss of income is in the poorest section of society.

    Clearly the government are out to make the poor poorer. A travesty.


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