William Eichler 28 April 2017

Gov plans to cut welfare to impact ‘poorest families’

Planned Government cuts will have a bigger effect on the entitlements of the poorest families than those made by the coalition, analysts say.

The Institute of Fiscal Studies (IFS) has published a new report looking at the impact of tax and benefit changes since May 2015 on the incomes of different kinds of households.

It found increases to the income tax personal allowance and higher-rate threshold have been the biggest change to taxes or benefits so far this Parliament.

This cost the Government around £5bn per year, the report found, but it benefited most basic-rate taxpayers to the tune of £160 a year, while most higher-rate taxpayers gained £380 a year.

The IFS’ report argued the cuts to benefits so far have been small, but it warned the Government’s plans for future cuts would significantly reduce the incomes of low-income working-age households, particularly those with children.

The most important changes are the cash freeze in most benefit rates, cuts to child tax credit and the continued roll-out of the less generous universal credit.

If these planned cuts were fully in place now, nearly 3 million working households with children on tax credits would be an average of £2,500 a year worse off, with larger families losing more.

However, the IFS stresses that many of the changes will not create immediate losses of benefit income, because of protections for existing claimants.

The report concludes that since 2010 lower-income households have lost out as a result of benefit cuts and the richest households have lost out from increases in income tax.

But those on average and moderately high incomes, as well as most pensioners, have seen their incomes almost completely protected on average.

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