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%.

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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.

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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".


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