Wednesday, 25 August 2010

Poorest to be hit the hardest, say IFS

Poor families will be hit hardest by the Coalition's proposed cuts, the Institute for Fiscal Studies said today.

Low income families with children are set to lose the most as a percentage of net income due to benefit cuts announced in the Budget.

The IFS report said, " Once all of the benefit cuts are considered, the tax and benefit changes announced in the emergency Budget are clearly regressive as, on average, they hit the poorest households more than those in the upper middle of the income distribution in cash, let alone percentage, terms."

James Brown for the IFS told BBC radio, " When you also include the measures that were pre-announced by Alistair Darling in previous Budgets and pre-Budget reports, the overall package does seem somewhat regressive, particularly within the bottom nine-tenths of the income distribution."

Cuts to housing benefit and disability allowance would hit the poorest families to the tune of £422 between the Budget and April 2014, the IFS say.

The IFS question the Government's decision to use the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) when calculating certain benefits.

More than three-quarters of benefit claimants were affected by increases in housing costs, which are included in the RPI, they said.

" Low-income households of working age lose the most as a proportion of income from the tax and benefit reforms announced in the emergency Budget. Those who lose the least are households of working age without children in the upper half of the income distribution.

" They do not lose out from cuts in welfare spending, and they are the biggest beneficiaries from the increase in the income tax personal allowance."

Shadow Work and Pensions Secretary Yvette Cooper accused the Government of carrying out a 'shocking and unfair attack on children and families'.

" The idea that the poorest families with children should end up being hit hardest is appalling and gives lie to George Osborne's claim it was a progressive Budget," she said.

A spokesman for the Treasury said, " The Government does not accept the IFS analysis. It is selective, ignoring the pro-growth and employment effects of Budget measures - such as helping households move from benefits into work, and reductions in corporation tax."