Budget will “hit poor hardest”, study claims

The coalition government’s first budget will hit the poor the hardest, according to a report by the Institute for Fiscal Studies (IFS).

The IFS claimed that proposed benefit cuts, such as cuts in tax credits, housing benefits and disability allowance, will hit those on lower incomes the hardest, taking a greater proportion of their total income, with the analysis suggesting that the poorest families will be hit to the tune of £422 between the Budget and April 2014.

This means that only the richest 10% of households lost more in cash terms from the Budget, than those in the bottom 60%.

The report also questioned the government’s decision to use the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) when calculating certain benefits, given that CPI does not take into account increases in housing costs.

The report said: “Low-income households of working age lose the most as a proportion of income from the tax and benefit reforms announced in the emergency Budget.

“Those who lose the least are households of working age without children in the upper half of the income distribution.
“They do not lose out from cuts in welfare spending, and they are the biggest beneficiaries from the increase in the income tax personal allowance.”

The Treasury said it did not accept the “selective” findings of the IFS.

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