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Monday 3rd
posted by Morning Star in Britain

Research shows that rich are set for more cash. By Sam Tobin

CHANGES to taxes and benefits due to come into effect this week will make the rich richer and the poor poorer, economists warned yesterday.

The richest half of households will reap 80 per cent of a £2 billion tax cut windfall as the poorest third of households shoulder two-thirds of £1bn in welfare cuts, a Resolution Foundation study found.

It amounts to “a significant transfer [of money] from low and middle income households to richer ones,” said the think tank.

From Thursday all working-age benefits will be frozen rather than rising with inflation, the £545 family element will be removed from tax credits and universal credit for new claims or births and a two-child limit on new claims will be imposed.

The removal of the family element will effect 270,000 families in this financial year, rising to 1.2 million by 2020-21, while the two-child limit will hit 160,000 families, rising to 640,000 in 2020-21.

At the same time, the personal tax allowance will be raised above the rate of inflation — from £11,000 to £11,500 and the higher tax rate threshold will be lifted from £43,000 to an inflation-busting £45,000.

The report shows that a single parent with a baby earning around £17,000 a year will be £530 worse off, while a high-income couple with two children, earning £100,000 a year, will benefit to the tune of £480.

Resolution Foundation director Torsten Bell said: “These amount to unwise giveaways to richer households and unjustifiable takeaways [sic] from less well-off families.

“The result is higher inequality and a decision to squeeze living standards for low and middle-income families at a time when rising prices are already outstripping wage growth.”

David Finch, senior economic analyst at the foundation, noted that some of the changes, such as a rise in the minimum wage and the introduction of tax-free childcare, would benefit some households.

But he added: “The skewed nature of this generosity means that better-off households will receive four-fifths of the gains, while the poorest third of households will actually be worse off overall.”

A separate report by the Child Poverty Action Group and Institute for Public Policy Research revealed that 200,000 children face being dragged below the poverty line as a result of the “pernicious” two-child limit.