Budget 2012: Who gets hit hardest?

 

Labour leader Ed Miliband spoke up for the squeezed middle today as the government stressed how it was helping low to middle income families. But the Treasury's own figures claim to show that, while everyone is a loser, the people hit hardest by the Budget changes are Britain's very poorest and very richest.

The official Red Book detailing the government's assessment of the Budget's impact shows that the 40% of households who lose the least as a proportion of their income are in the top half of the income table. The biggest losers are the bottom 20% and the top 10%.

Graph showing how poorest and richest lose most from the Budget

It is worth noting that this graph does not include the impact of the cut to the 50% rate of tax because, the Treasury says, "the behavioural response is so large that presenting a static analysis would not be representative of likely actual impacts". In other words, it is too difficult to work out how much a tax cut for people earning over £150,000 will save them.

Another way of thinking about the Budget's impact is to look at how much people have got to spend. This graph looks at how the changes are expected to change household expenditure. Again, everyone will have less to spend but again it is the very poorest and the very richest who will see the greatest squeeze on their spending power.

Graph showing changes to household expenditure

So, while there has been much attention paid to the squeezed middle today, perhaps it is worth noting what is likely to happen to the group described to me on Twitter today as "the squashed bottom".

UPDATE 16:52 GMT

To give you some idea where the income bands for each 10% of households fall, you can see figures from last year here.

 
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  • rate this
    0

    Comment number 33.

    Thank you Mr Osborne. I've just heard that I have officially scraped into the Rich List. From this year I will be a higher rate tax payer.

  • rate this
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    Comment number 32.

    This budget has produced a triple granny whammy. First, years ago, wage related increases were replaced with rpi as the measure used to determine pension increases losing pensioners substantial amounts of income ongoing, and just this last year rpi was replaced with the lower cpi as the future measure that will be used to determine future rises ongoing.
    And now age allowance is to go.

  • rate this
    0

    Comment number 31.

    the biggest losers are people with 1 child who have a combined income of over 26,000 ,who lose 534 a year in child tax credit, so stop all those whingers about child benefit. my household income is only 35,000

  • rate this
    0

    Comment number 30.

    Osborne has a ticking political timebomb. With all these people at the low end paying no tax they will never benefit from future tax changes because they pay no tax. So the message will always be " only the better off are gaining". A Lib Dem inspired trap.

  • rate this
    +1

    Comment number 29.

    This sort of analysis is not useful unless accompanied by information on what proportion remain in same decile over the whole period. Other parts of Govt policy have major impacts on this,many unemployed crash down the deciles, also ignores fact that borrowers have been protected and those relying on savings income hammered and will have fallen to lower deciles.

 

Comments 5 of 33

 

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