Were We Really All in it Together? The Distributional Effects of the 2010–15 UK Coalition Government's Tax‐benefit Policy Changes

Abstract

This article examines the distributional impacts of changes to benefits, tax credits, pensions and direct taxes between the UK general elections of May 2010 and May 2015. The changes did not have a common effect on all household incomes; nor did the direct tax-benefit changes contribute to deficit reduction. Effectively, reductions in benefits and tax credits financed part of the direct taxes cuts, but the overall net fiscal cost increased pressure for cuts in other public services and increases in other (more regressive) taxes. The main gains were in the upper middle of the income distribution, and the main losers were at the bottom and those close to, but not at, the very top. Across most of the distribution the changes were regressive. By comparing with other analyses of policy changes in the same period, we illustrate the importance of analytical choices and assumptions for detailed conclusions on their distributional effects. We also show how some groups were clear losers or gained little on averageincluding lone parent families, large families and families with younger children. Others were gainers, including two-earner couples, and those in their fifties and early sixties. The findings show that a dominant feature of the period was that the combination of higher tax-free income tax allowances, financed by cuts in benefits and tax credits, was generally regressive. As this combination also lies at the heart of the proposed policies of the Conservative government since 2015, we would expect these effects to be intensified in the coming years.

Welfare, Austerity and Social Citizenship in the UK

“…Contributing towards this, are a series of changes to the tax-benefit system, including the introduction of a benefit cap for social tenants, 'removal of the spare bedroom subsidy' and cuts to working tax credits for many low-income lone parents and families. Despite assurances that 'those with the broadest shoulders should bear the greatest burden', public service reforms as well as tax-benefit changes have been highly regressive (De Agostini et al, 2015). Alongside this, benefit sanctions and financial penalties now have an increasingly prevalent role with these being used much more widely and frequently than ever before in social security, but also other welfare domains.…”

‘How the Other Half Live’: Poor and Rich Citizenship in Austere Welfare Regimes

“…Whilst cuts to public social spending have been less pronounced in New Zealand, tax-benefit changes have been notably regressive in both countries (De Agostini et al, 2015;NZT, 2016). Between 2008 and 2015, the realterm value of working-age social security fell significantly in both countries (De Agostini et al, 2015;NZT, 2016).…”

“…In response to the global financial crisis of 2008, this has also occurred alongside a programme of regressive cuts to public social spending with wealthier households relatively protected and low-income households worst affected (De Agostini et al, 2015;NZT, 2016). At least in liberal welfare regimes, these developments are undermining the integrative function of social citizenship.…”

Which Types of Family are at Risk of Food Poverty in the UK? A Relative Deprivation Approach

“…In the UK, stagnating incomes, rising costs of living and, from 2007-2012, the rising price of many foods, have made food less affordable, especially for lower income households (Defra, 2015). Whilst there is evidence that the impacts of the global financial crisis and changing social policy, including welfare reform, have hit UK households with children harder than those without (De Agostini et al, 2014;Stewart, 2015), not enough is known about how these economic phenomena and policy changes have impacted families' ability to feed themselves.…”