Families and poor 'hit hardest by tax and spend changes'

children reading in a library Image copyright Science Photo Library

Families with young children and poorer households have been worst affected by government changes to tax and benefits, according to a new report.

The research from the LSE and the universities of Manchester and York examines the coalition's tax and spending record.

It says poverty will get worse over the next five years.

In response the government said the richest have "lost the most" from changes to taxes and welfare.

John Hills, director of the Centre for the Analysis of Social Exclusion at London School of Economics and one of the lead authors of the report said despite coalition promises that the greatest burden of the cuts would fall on those who had more, and that the poor would be protected, that had not happened.

"While people at the bottom were initially protected with the way benefits were adjusted for inflation, that has not been the case for the last two years," he said.


The report says tax and benefit reforms have hit families with children under five harder than any other household type.

Policies affecting families with young children include the abolition of baby tax credit which increased the payments for households with a child under one and extra support for pregnant women.

Further changes have affected families on limited incomes, including the £26,000 cap on total benefits a household can receive and shifting tax credit thresholds.

As well as changes to taxes and benefits, the report also highlights cuts to government spending affecting young children.

Real spending per child on early education and childcare and Sure Start services fell by a quarter between 2009-10 and 2012-13 it says.

"That it's families that are taking the biggest hit is really disappointing and short-sighted, said Kitty Stewart, author of the part of the report examining the impact on under fives.

"We know that family income and services are important to children's development. All the research evidence tells us both of those matter and both of those have been hit."

She estimates some families may have lost out on around £1200 in their baby's first year.

Tax freeze

A Treasury spokesperson said: "the richest have lost the most from the government's changes to taxes and welfare."

It said the LSE's research also failed to take into account "the effects of changes to the vital public services on which so many rely. That means that it can't consider the full range of ways the government provides support to the poorest and most vulnerable families across the country".

The Treasury pointed to the freezing of fuel duty and council tax, the provision of free school meals and tax-free childcare, and the increase in the tax-free personal allowance as measures that would help many people, including lower income groups and families.

The Institute for Fiscal Studies reported last week that coalition changes to tax and benefits have cost the average UK household £489 a year with low-income working-age households hit hardest.

The IFS said the poorest tenth of households lost around 4% of their incomes.

John Hill from the LSE said it was true that the very rich, with incomes over £100,000 had lost out more than the average, but that when viewed as a proportion of their income, it was the poorest who had lost out most.

He said strategic decisions on the part of the government to ring-fence the NHS and schools had meant even larger cuts for other areas of spending.

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