Hitting the working poor

At the time of the last budget I pointed out that the Treasury’s own documents showed that most of us are worst off as a result of the decisions made in that budget and previous decisions made by the coalition Government. You can access the Treasury’s own documents here but the key graph for me is this one:

budget impact distribution

The translation between quintiles and average household incomes is complex (see page 22) of the Treasury document Impact on households:distributional analysis to accompany Budget 2014

Note that much of the increased tax for the top quintile is the top rate of tax going up as this didn’t kick in until after the general election. The important point to note is that the gain from increasing the starting rate of tax is dwarfed by the changes in tax credits and benefits. For the third quintile we could be talking about a family with two adults earning £27,000 between them. This is the average and they gain the most from the change in tax threshold but they still lose more from the changes to tax credits, benefits and public service spending (e.g. spending more on childcare after the Tories broke their promises on Sure Start). More importantly, adults’ wages have on average gone down by £1,600 under this government – which would mean our average two working adult family losing a further £3,200 pounds (and ONS now say household incomes are continuing to fall).

The lower down the scale the worse the situation. Remember a majority of those hit by the benefit changes are in work, not out of work. They just aren’t earning enough to make ends meet.

Cameron’s solution? Hit the working poor harder and give a tax break to those on incomes over £40,000. The families that benefit the most from this change in the threshold? Those earning over £50,000 – the top decile. It is clear that Cameron is for the few who are already privileged – we need a government that will stand up for the other 90%.

What do you think?

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