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 881.

    It doesn't show that the richest get bargains on all luxury items as they fall in price during recession.The people paying the most are the ordinary hard working men and woman who are paying for the rich people's tax cuts and for the services and benefits that hundreds of thousands use and take without contributing.

  • rate this

    Comment number 880.

    874.AHDIDUMS - Made redundant 4 times? What is the common denominator there then?
    877. Dave 1506 - Thanks, perhaps we could vote for Norway to govern us next time.
    875.BdV - Debate has an e on the end, it's Occam's razor.

  • rate this

    Comment number 879.

    @874 AHDIDUMS

    Good for you. Now please tell me how my family member is lucky to have to pay out only £480 in council tax, when they can't do anything but be a full time carer, unless the state wants to spend a vast sum of money to put my disabled family member in a home?

    How is that fairer than you getting nothing from the state, you paying in lots, but having a £900 council tax bill?

  • rate this

    Comment number 878.

    Makes me smile the people on here: "I earnt £100K+ last year and had to pay £xyz in tax, I earned it!; I'm not paying more .....". You are exactly the people inhibiting others actually receiving a fair wage. You are the company directors etc who decide everyone else gets 1% (if that in pay rises) and your employees only earn the bare minimum. Get your hand in your pocket and pay the rest better!

  • rate this

    Comment number 877.

    Simple they didn't cut tax kept their windfalls as a sovereign wealth fund which enabled them to invest and make money . Our governments sold everything off to these wealth funds so the money leaves our shores.

  • rate this

    Comment number 876.

    Whilst you may not have claimed benefits from the state who paid for/subsidised your initial education and subsequent training for your three careers? Many people do not have that luxury.

  • rate this

    Comment number 875.


    Nice try !
    But I can see through Trolls at 10 metres... 8^)

    Shame you weren't open to a debat though... It could have been fun.
    And if you say 'platitudes' and 'clichés' again, try answering my questions at the same time ...

    And Ockham's Razor is a great tool, by the way.
    But some may feel threatened by it ...
    lol !!! ;^)

    Here, many prefer Mlle La Guillotine ...

  • Comment number 874.

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

  • rate this

    Comment number 873.

    @869 AHDIDUMS

    Wow, just wow. Apart from the services you get, if you ever find yourself unemployed or disabled, I hope you think twice about what you've just written.

    Do you think that people that have worked hard are asked to be made redundant and have to live off so little?

    Do you think that people ask to become disabled or end up being full time carers and have to struggle to get by?

  • rate this

    Comment number 872.

    If you can't afford to have children then don't. Many of us in the "couple, no children" category could get ourselves moved into one of the "greater" hit categories just by having a child.

    Furthermore, we are probably the group that uses the least from the system (other than the rich who probably take out nothing) so why should we be targeted next?

  • Comment number 871.

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

  • rate this

    Comment number 870.

    869.AHDIDUMS - Roads, schools, hospitals, police, fire service, refuse collection, welfare, disability allowance.etc. etc.
    Tax pays for some that we use, National insurance pays for some that we might need to use.
    It is a shame, but try to look on the bright side.
    If you don't claim on your insurance, then you should be happy that you didn't need to, not feel 'had' for paying the premium.

  • Comment number 869.

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

  • rate this

    Comment number 868.

    816 Starbucks, amazon, google etc are companies not people they don't pay income tax? Switch from peace studies to a proper degree and you might get this.

    In simple language for you. If the top 10% of earners leave the country we lose more than 50% of all income tax receipts.

  • rate this

    Comment number 867.

    863.jg I think the fault may be our oppositional system. Whatever is proposed by the party/ies in power is opposed by the other regardless of it's merit. We are then asked to vote for who best represents us, not the country.
    How did Norway accrue such a surplus? How can we learn from this?

    864.BdV Another platitude to end with, plus three cliches to warm up.
    Still not trying.

  • rate this

    Comment number 866.

    @865 AHDIDUMS

    Ah, I see, I couldn't quite tell. That sounds bad for you... How come?

    I'm sick of the Government generalising with strivers and scroungers. I've read a few comments from people who obviously can't tell the the truth from the spin, and are happy to form an opinion without looking at the facts first.

    I was angry at the situation and ignorance, now I'm just tired of it.

  • Comment number 865.

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

  • rate this

    Comment number 864.

    Where are your answers to my questions, Steerpike ?
    I wonder where the platitudes really are in this debat.
    The 'natural' cyclical nature of this system, the booms then the BUSTS and the ensuing feeding frenzies creating untold wealth by raping the masses ...
    How convenient that the sheeple forget.

    The truth is thatmost of us really are in the same boat, just that the majority can't see it.

  • rate this

    Comment number 863.

    The public don’t want to go through the pain of addressing our chronic UK addiction to government overspending - the electorate doesn't like voting for fiscal responsibility as it hurts too much!
    Every proposed spending cut or tax rise is met with a protest of indignation from self-interest groups. Elections are an advance auction of stolen goods.

  • rate this

    Comment number 862.

    @859 You are already paying a levy on your savings. With interest rates at below 0.1% and inflation running at 2.7% you are losing 2.5%+ per year whilst the bankers are making a fortune lending multiples of your deposit out at inflation busting rates.

    Do the country a favour, take your savings out of the bank and make the bankers work for a living..


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