Treasury's Own Analysis Reveals Budget Will Hit Poorer Households Hardest Long-Term

Many families will end up worse off.
EMPICS Entertainment

Long-term budget decisions made by the government will hit poorer families hardest, analysis reveals.

According to the Treasury’s own household impact assessment documents, the impact of changes to tax, welfare and public spending will affect those in the bottom income brackets most significantly, as well as those at the very top, both of which will lose nearly 2% of their net income by 2019/20 - the former through welfare cuts and the latter through tax.

Set to benefit most are households with middle and mid-high incomes, some of whom will see an increase of nearly 1% from ‘benefits-in-kind’ from public services.

Overall, the poorest will lose out by between 0.5% and 1% and the richest by just over 1.5%.

Labour leader Jeremy Corbyn accused Chancellor Philip Hammond of “revising people’s wages and living standards down”.

He added: “The poorest tenth of households will lose about 10 per cent of their income by 2022, while the richest will lose just 1 per cent.

“So much for ‘tackling burning injustices’. This government is tossing fuel on the fire.”

In her first speech as prime minister, Theresa May pledged to put working families at the heart of government decisions and help those who were ‘just about managing’.

But Sumi Rabindrakumar, research officer at Gingerbread, the charity for single parent families, said May was failing those she promised to help.

“The impact assessment shows what we feared – this budget doesn’t go nearly far enough to tackle the drastic losses that will be felt by those on the lowest incomes, particularly single parents who face some of the biggest cuts,” she told HuffPost UK.

Labour leader Jeremy Corbyn.
Labour leader Jeremy Corbyn.
PA Wire/PA Images

The charity welcomed the government’s pledge to cut waiting times for Universal Credit payment times by a week, but said more needed to be done to help those who will struggle to make ends meet before Christmas.

“Changes to the administration of Universal Credit are welcome, but are the tip of the iceberg – far more is needed to make good on the promise to make work pay and genuinely help families struggling now,” Rabindrakumar added.

Lib Dem MP Tom Brake said it was clear the budget would hit poorest households hardest.

“The government found £3bn to spend on Brexit, but nothing for our police or social care,” the Carshalton MP said.

“This budget was meant to save Philip Hammond’s career, but it has fallen apart before the day is even over.”

Lib Dem MP Tom Brake.
Lib Dem MP Tom Brake.
PA Archive/PA Images

Jonathan Bartley, co-leader of the Green Party, those who “have the least will be locked into years of poverty”.

He added: “With one million food parcels handed out last year, and five million children facing poverty, families across the country are struggling to make ends meet. Today they needed a lifeline from the government, but what they got was more pain.

“Our public services NHS and local authorities are already on their knees after years of cuts, and this budget will only pile on more pressure. The continuation of the benefits freeze meanwhile will leave families facing poverty this Christmas.

“It’s time this callous government changed direction and put people first.”

According to research by the Resolution Foundation think tank, family finances have deteriorated more markedly than expected.

The foundation said its analysis showed that disposable incomes are now expected to be £540 lower by 2023 than forecast in March, largely as a result of weaker pay growth and annual pay has been lowered by around £1,000.

Green Party co-leader Jonathan Bartley.
Green Party co-leader Jonathan Bartley.
NIKLAS HALLE'N via Getty Images

As a result, pay is not set to return to its 2008 peak until the middle of the next decade, with Britain now facing a 17-year pay downturn.

Director Torsten Bell said: “The chancellor has been handed a massive downgrade to expectations for how fast Britain’s economy can grow – knocking a full quarter off the growth we can expect over the next five years.

“While the result for the public finances is grim, the chancellor has chosen to take the extra borrowing on the chin and indeed to borrow more, including welcome new action on housing.

“The outlook for family finances however is worse. Our incomes are expected to be £540 lower than previously thought and pay is not set to return to pre-crisis levels until the middle of the next decade.

“The chancellor has made the wrong call to press ahead with a damaging freeze on benefits. Welcome moves to reduce the waiting time for Universal Credit are also not matched by dealing with the much bigger challenge of planned cuts to the new benefit.”


What's Hot