Government policy

A report by a committee of MPs has said that the costs and benefits of cutting the highest income tax rate from 50p to 45p are ‘highly uncertain’. They argue that the figures quoted by the Coalition government could be significantly out.

The warning is contained in the MPs’ analysis of the 2012 Budget measures. It calls on the government to publish a comprehensive assessment of the exchequer effect of the new 45p rate.

Two separate analyses have found that women are bearing the brunt of austerity measures introduced by the Coalition government. One analysis, by the House of Commons Library, calculates that nearly 75 per cent of budget savings since 2010 have primarily hit women’s incomes. A second analysis, by the Women’s Budget Group, examines the most recent (2012) Budget.

The Commons Library traces the gender impact of a long list of fiscal measures, starting with the 2010 Budget. The combined impact – by reference to projected government revenues in 2014/15 – is calculated to be £14.9 billion, of which £11.1 billion (74.5 per cent) will fall primarily on women.

The most severe impacts derive from changes to public sector pension arrangements (£6.1 billion), the tapered removal of child benefit from higher-rate taxpayers (£1.6 billion), and the decision to freeze child benefit for three years (£1.3 billion).

The Coalition government risks repeating the mistakes of the previous Labour government by focusing too much on tax and benefit incentives as the only solution to poverty, argues a budget briefing from the Joseph Rowntree Foundation, What will Budget 2012 Mean for UK Poverty? The briefing also argues that while, taken in isolation, the impact of the Coalition government’s aim to raise the tax threshold to £10,000 could help those on low incomes, it must be seen in the context of overall tax and benefit changes.

The briefing notes that for families with children the raising of the income tax threshold by £1,000 in April 2011 more than outweighed the gains created by freezing child benefit, reducing tax credits and reducing child care reimbursement.

The briefing draws on evidence from the organisation’s previous research to show how potential policy decisions in the Budget would affect poor places and people in the UK.

The government’s new Universal Credit will hit poorer working mums the hardest, according to a report by the charity Save the Children. The report, Ending Child Poverty: Ensuring Universal Credit Supports Working Mums, argues that the potential impact of the new welfare system, which is due to replace tax credits and most benefits from 2013, risks making life harder for some families.

It identifies three main areas of concern:

Without changes in these areas, it argues, the scheme’s aims of making work pay by supporting parents into work and of reducing child poverty could be undermined.