Households to lose out from government’s tax and benefit reforms

Households will lose an average of £160 in 2012/13, rising to £370 in 2013/14, as a result of the Coalition government’s tax and benefit reforms, according to a report by the Institute for Fiscal Studies (IFS). The net effect of the 2012/13 tax and benefit reforms amounts to a ‘takeaway’ of about £4.1 billion this year and £9.8 billion in 2013/14.

The report, Tax and Benefit Reforms Due in 2012–13, and the Outlook for Household Incomes, by Robert Joyce, also shows that:

  • this comes on top of the effect of indirect tax rises (in particular the rise in the main rate of VAT from 17.5% to 20%) in January 2011, totalling about £12.8 billion per year (£480 per household), and a net takeaway of about £3.9 billion (£150 per household) in 2011–12 from tax and benefit reforms introduced during that year
  • the largest average losses from the 2012–13 reforms as a percentage of income will be among those in the bottom half of the income distribution, with poverty levels rising as a result
  • households with children are set to lose the most from the reforms, and pensioner households are the one major demographic group who will gain from them, on average.

The full report, Tax and Benefit Reforms Due in 2012–13, and the Outlook for Household Incomes, can be found on the IFS website, briefing note 126.

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