The ‘Poor lose and rich gain from direct tax and benefit changes since May 2010 – without cutting the deficit.’
That’s the damning headline from the joint report by the London School of Economics and Essex University released today.
The report analyses the combined effect of changes in direct taxation and benefit.
It shows
– that the poorest groups have lost the biggest share of their incomes
– that those in the bottom half of incomes lost overall
– those at the very top gained – because of the cut in the top rate of income tax
– and that the changes have ‘not contributed to cutting the deficit’. Instead, the money saved from reducing benefits and tax credits has been spent on raising tax-free income tax allowance.

The report also reveals how far official Treasury figures have been distorting the situation – making it appear as if the top income earners had lost proportionately most. That is only true if you take the start date as January, so that it includes Labour’s rise in tax for the top earners which came into effect in April 2010. That date ‘May 2010’ is critical – it’s the effects of the Coalition’s actions we’re seeing here – effects masked if you calculate, as the Treasury has, from January 2010.

The effect of the LibDem/Tory Coalition’s changes to benefits and taxation have been regressive – with clear losers including lone parent families, large families, children ad middle-aged people – i.e. at the age when they are parenting.
Children, note, lose out in group after group.

Ed Balls commented
“This is a damning analysis of David Cameron and George Osborne’s record. It demolishes any last pretence that we are somehow all in this together.
“People on middle and low incomes have been made worse off by this government, while a few at the very top have been given a £3 billion a year tax cut.
“Now the Tories want to cut tax credits again for working families and won’t rule out giving millionaires another huge tax cut. Working people can’t afford another five years of this same old Tory economics.
“Ed Miliband and I are determined that Labour’s economic plan will deliver a recovery for the many, not just a few. And our plan to balance the books in a fairer way will start by reversing David Cameron’s tax cut for the top one per cent of earners.”

Day after day it becomes more and more obvious just how much the May 2015 election is going to matter.

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