Middle-income earners ‘to be hit hardest by public service spending cuts’

6 Jul 15

Middle-income households will be the hardest hit by planned government spending reductions on public services, an analysis for the Trades Union Congress has found.

A report for the TUC by Landman Economics estimated that the cuts in public service provision, as part of the government’s £30bn spending reduction plan to 2018/19 to get the public finances into surplus, would affect middle-income households most.

It forecast that the total spending reduction could amount to £32bn by 2018/19 once inflation was taken in account. If the government reduces spending in a similar manner to the coalition government from 2010-2015, which NHS and school spending protected, households in the middle income decile could face a loss of service equivalent to more than £3,000 in cash each year. The loss for the highest-income households (decile ten) is around £1,000 less at just over £2,000, while those in the poorest decile will lose nearly £2,500 in services, although this does not take account of the £12bn in welfare spending cuts planned as the reduction.

The calculation found that cuts to provision such as public health on social care would have the greatest impact on middle earners.

Couples with children were estimated to lose services worth more than £4,500, while lone parent families face a reduction in provision worth nearly £3,000.

When these reductions added to the reductions since 2010, excluding benefit payments, the report found that the medium decile was also most affected in cash equivalent terms, losing provision equivalent to more than £3,000. This is compared to losses of around £2,300 for the lowest decile, and over £2,000 for the highest group.

TUC general secretary Frances O’Grady warned the cuts would impact on the economy. If families were let down by health and social care provision, more people will have to give up work to become carers and fewer will be able to work the full hours they want, she said.

“Good quality services are not only vital to families going about their everyday lives, they’re also essential for delivering a strong economy with high productivity.

“We need the best quality education today if we are to compete with the world’s most advanced economies tomorrow.”

  • Judith Ugwumadu

    Judith Ugwumadu joined Public Finance International and Public Finance online as a reporter after stints at Financial Adviser, Global Security Finance and The Sunday Express. Currently, she writes about public finance, public services and economics.

    Follow her on @JudithUgwumadu_

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