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.

 
Mark Easton, Home editor Article written by Mark Easton Mark Easton Home editor

Comments

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  • rate this
    +6

    Comment number 1.

    Those charts would be a lot more useful if we knew the bounds for the income deciles - I'd like to know which one I fall in!

  • rate this
    +8

    Comment number 2.

    Once again your article omits one of the largest sectors - the pensioners.
    Anyone in the middle band of pensioners up to £30000 will lose proportionately more as a result of the stealth tax of personal allowance merging. This group is also never represented correctly in terms of a higher incidence of inflation by the nature of spending needs particularly fuel costs and care services and products.

  • rate this
    +2

    Comment number 3.

    The poorest pensioners will lose out in the longer term. The state pension proposal of £140pw coupled with the triple guarantee is likely to mean anyone solely dependent on the new state pension is likely to be paying income tax in around 10 to 15 years after the introduction of the new pension.

  • rate this
    -3

    Comment number 4.

    What's new, to simplify matters, the RICH get richer and the POOR get poorer, nothing EVER changes! Steal from the POOR to pay the RICH, Robin Hood in reverse!

  • rate this
    +8

    Comment number 5.

    What must not be forgotten is that budgets also impact on public spending and the cuts in services affect the bottom and middle but not the top. There are myriad increases in charges by councils and others that result from the reductions in expenditure as well as the loss of services and this will soon show in the NHS. Pensioners - increases by CPI as well as reduction/loss of age based allowances

 

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