Low-income households of working age lose the most from the June 2010 Budget reforms because of the cuts to welfare spending. Those who lose the least are households of working age without children in the upper half of the income distribution. This is because they do not lose out from cuts in welfare spending and are the biggest beneficiaries from the increase in the income tax personal allowance.
Now. Umm, I\’m really rather shocked that anyone is surprised at this.
Two basic decisions have been made. One, that we need to trim (at least!) the welfare state. Partly this is to do with not having a great deal of money around and partly so that work actually pays: when there is no point, financially, in going to work then more people won\’t go to work.
Now, we can argue about whether that\’s a good idea or not but given that this is what the current government has decided, the thought that this will hit poor families of working age the most shouldn\’t be surprising. For it is, of course, poor families of working age who are the recipients of the largess (pittance, to taste) that the welfare state distributes.
Welfare cuts will, of course, be bourne by those who receive welfare.
Second, the decision has been taken that tax rates are too high. Again, we can differ over this but there\’s an entirely reasonable case to be made that current levels of taxation (imposed upon our really, compared to the Nordics, rather bureaucratic and meddling economy) are harming long term growth prospects. If we had the classically liberal economies of the Nordics we might be able to get away with the high taxes and redistribution. Or if we kept the bureaucracy then we can\’t have them perhaps.
But that decision having been made it\’s really not all that much of a surprise, or at least it shouldn\’t be, that the gains from lower taxation go to those who currently pay the most in taxation: higher income families.
And when you put the two together, given that higher income families with no children don\’t get those universal subsidies for children, it really shouldn\’t come as a surprise to anyone at all that the beneficiaries of lower tax and lower welfare payments are higher income families without children and the losers are lower income families with children.
What did anyone think would happen? That tax cuts would aid those who don\’t pay tax and that welfare cuts would harm those who don\’t get welfare?
As to what Osborne said about it all: he is a politician and his lips were moving. \’Nuff said.