Were we really all in it together? The distributional effects of the 2010-2015 UK Coalition government's tax-benefit policy changes
1 Jun 2017
This paper examines the distributional impacts of changes to benefits, tax credits, pensions and direct taxes between the UK Elections in May 2010 and in 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 average – including lone parent families, large families, and families with younger children. Others were gainers, including two-earner couples, and those in their 50s and early 60s. 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.
Social Policy & Administration
University of Essex Research Repository - http://repository.essex.ac.uk/20059/