Tax and benefit changes “make poorest households worse off”

7 Sep 15

The government’s tax and benefit changes will cost poorest households an average of £460 a year, despite the minimum wage increase, a Trades Union Congress analysis has found.

In an examination of a host of government benefit changes, including to Universal Credit and tax allowances as well as the ‘living wage’ reform, the TUC said the wealthiest fifth of households would gain the most – around £670 a year. Those in the middle of the income spectrum would make smaller gains, at almost £200 a year, but the two poorest fifths would be left worse off.

TUC general secretary Frances O’Grady said: “Even after the extra help from a larger tax allowance and a higher minimum wage, low-paid families will still be made more than £8 a week worse off on average by 2020. And if Universal Credit is delayed, leaving families still on tax credits, their losses will be hundreds of pounds a year more.

“David Cameron needs to explain to low-paid families why he is cutting their income by the same amount as a whole year of school dinners, but he’s giving the richest a cash boost worth a bottle of champagne every week.”

She said it was bad economics to fund a tax break for the rich by taking away support for poor families.

“We need more money in the pockets of low paid families so that they can get out and spend it in their local businesses,” she said.

The TUC also noted that the type of distributional analysis they published today was included in every Budget during the last parliament, but was missing from the chancellor’s July’s budget, when many of the latest tax and welfare changes were announced.

Earlier this month, the Unison trade union also warned that the summer Budget changes would leave the lowest paid worse off.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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