Poorest are hit hardest by tax, social security and public spending reforms, says EHRC

Posted On: 
17th November 2017

New analysis from the Equality and Human Rights Commission shows that the poorest in society are being hit the hardest and are set to lose 10% of their incomes; whilst the richest will lose barely 1%.

The Commission has started this work for the Treasury and demonstrated that this approach is possible.
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All Budgets invariably include announcements of changes in tax, social security and public spending. After all, that is their purpose. This budget will be no different

Each policy announcement has its own line in the Chancellor’s speech and is backed up with more detail in the Red Book for everyone to interrogate.

But what we don’t see in any of the figures are an analysis of the cumulative impact of all these changes on different groups in society. How do changes in tax, social security, VAT, and minimum wage, for example, affect the total income for people, especially those that are already disadvantaged in society?

The EHRC has been asking the Treasury for years to undertake this analysis and include it in their Budget preparations.  To date the Government has decided not to do this so we have decided to do the Cumulative Impact Assessment for them.

We asked leading economists to model changes to all tax, social security and public spending reforms from 2010 to 2017 and to examine what effect these changes will have on people by 2022.

The results are startling.  They show that the poorest in society are being hit the hardest and are set to lose 10% of their incomes; whilst the richest will lose barely 1%.

But we have gone further than analysing only the poorest versus the more fortunate.  We have also looked in more detail and found that black households will face a 5% loss of income - double the loss for white households; families with a disabled adult will see a £2,500 reduction of income per year compared to £1,000 for non-disabled families and families with a disabled adult and a disabled child will face a £5,500 reduction in their income.

Our analysis has also shown that the biggest average losses by age, across men and women, are for the 65-74 year olds (average losses of around £1,450 per year) and the 35-44 age group (average losses of around £1,250 per year); and that women will suffer a £940 annual loss which is more than double the loss for men.

The Prime Minister’s vision is for a Government that works for everyone, yet this will never be possible if the policies actually make the most disadvantaged people in society financially worse off.  

If we want a prosperous and, in line with the Prime Minister’s vision, a fair Britain the Government must come clean and provide a full and cumulative impact analysis of all current and future tax and social security policies.  It is not enough to look at the impact of individual policy changes.  If this doesn’t happen those most in need will face an extremely bleak future.

The Commission has started this work for the Treasury and demonstrated that this approach is possible. We are now asking HMT to commit to undertaking cumulative impact assessments of all tax and social security policies ahead of the 2018 budget; to reconsider existing policies that are contributing to negative financial impacts for those who are most disadvantaged and to implement the socio-economic duty from the Equality Act 2010 so that public authorities are required to consider how to reduce the impact of socio-economic disadvantage of people’s life chances.

We are ready to work with Government to show them how it is possible to implement this approach into future Budgets.

You can read the full report from the EHRC here