Business

Benefits cuts 'cost average family £489 a year'

Houses Image copyright PA

Coalition changes to taxes and benefits have cost the average UK household £489 a year, according to the Institute for Fiscal Studies.

Some households have lost a lot more than this, but others have gained from the changes the coalition has introduced, the IFS said.

Low-income working-age households have been hit hardest, losing the most as a percentage of their income.

Those with children in the lowest 10% of earners lost £1,223 on average.

The richest 10% of households with children lost £5,350 a year.

Middle-income working-age households without children have gained the most.

James Browne, a senior research economist at IFS and co-author of the report said: "Whichever way you cut it, low-income households with children and the very richest households have lost out significantly from the changes as a percentage of their incomes.

"Increases in the tax-free personal allowance have played an important role in protecting middle-income working-age households meaning that those without children have actually gained overall."

If changes to capital gains tax and corporation tax are included, families would have lost a notional £1,127 a year on average.

Pensioners

Tax and benefit changes include an increase in the main rate of value added tax (VAT), increases in the rates of National Insurance Contributions (NICs) and significant cuts to benefits.

The poorest households lost around 4% of their incomes, compared with around 3.5% for the next poorest tenth, between 2.5% and zero for middle-income households and a loss of about 2.5% for the richest.

Pensioners were "relatively unaffected" on average, as their gains from the "triple lock" on the state pension were largely offset by a hike in VAT.

Meanwhile, middle and higher-income households of working age have escaped "remarkably unscathed" from the government's austerity programme, with those without children actually gaining financially from the changes, largely due to increases in the threshold for paying income tax, said the IFS.

The hardest-hit region was greater London, where households lost an average £1,042, followed by south east England, the West Midlands and north west England.

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