It’s official – The poorest will get poorer as a result of the Autumn Statement

5th December, 2012 2:34 pm

On a day like today it can be hard to cut through the spin around the Autumn Statement. So this graph – produced by The Treasury – is very informative indeed.

It shows that the poorest are the hardest hit, and the very richest come off proportionately best. And the first 5 deciles are regressive – meaning that this mini-budget will leave all of the people in these (lowest paid) segments worse off.

The poor will poorer as a result of the Autumn Statement – even Danny Alexander is admitting it.

Here’s the graph:

 

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  • Serbitar

    More low stuff from a memorably loathsome Chancellor.

  • Looks like the very richest are hardest hit, or am I reading your overcomplicated graph incorrectly?

    • Dave Postles

      You should complain to the Treasury if you feel the graph is over-complicated. Any take from the poorest makes them the hardest hit in relative terms since they have no discretionary spending power. The most affluent will still be able to eat at high-cost restaurants, whilst the poorest will be struggling to buy their daily loaf.

    • Serbitar

      Percentage based comparison are not helpful when opposite poles of the income spectrum are considered because they do not relate in a fair manner the difficulty and suffering individuals experience under such circumstances. For the very comfortably off a reduction of hundreds of pounds a week often makes little difference, whereas for non-working people forced to survive on Jobseeker’s Allowance, a reduction of a couple of pounds a week can be a matter of survival.

      Treasury figures show that over 25 year old Jobseeker’s Allowance claimants will lose about £200.00 per year, based on a 1% benefit uprating cap, i.e., £200/52 = £3.84 per week, reducing their spending power from a meagre £71.00 per week to a ridiculously low £67.15. On top of this many of these people will soon be forced to pay a portion of their Council Tax for the first time reducing their tiny income even further. Measures like this will make it even harder for people in this position to get themselves back into work because they will have no spare cash to spend on transport, clothing, telephone and internet access (for jobseeking and such like) and because very few will be able to nourish themselves properly and heat their homes adequately many will fall ill, experiencing declining health and fitness, making it even harder for them to secure gainful employment.

      Really nasty, cold and brutal stuff.

      For Osborne to call such measures “fair” is to lie blatantly through his teeth.

      • jaime taurosangastre candelas

        You express well why “progressive” benefits are in my belief a good thing. If you look at the raw data in the ONS statistics:

        (see http://www.ons.gov.uk/ons/search/index.html?newquery=household+income+by+decile&newoffset=0&pageSize=50&sortBy=&sortDirection=DESCENDING&applyFilters=true , and select Table 14 about half way down),

        …you can see that even the most well-off households are receiving significant levels of cash benefits. If those were “tapered” with increasing income, they could be focussed more on those on the least income. It depends on how you calculate it, but if those in the top 4 deciles received no cash benefits, those in the lowest six deciles could receive an average benefits uplift of about 20%, at no cost to the country.

        I understand that many like as a principle “universal benefits”, but it is also appropriate to ask what this costs those on the lowest incomes.

      • jaime taurosangastre candelas

        You express well why “progressive” benefits are in my belief a good thing. If you look at the raw data in the ONS statistics:

        (see http://www.ons.gov.uk/ons/search/index.html?newquery=household+income+by+decile&newoffset=0&pageSize=50&sortBy=&sortDirection=DESCENDING&applyFilters=true , and select Table 14 about half way down),

        …you can see that even the most well-off households are receiving significant levels of cash benefits. If those were “tapered” with increasing income, they could be focussed more on those on the least income. It depends on how you calculate it, but if those in the top 4 deciles received no cash benefits, those in the lowest six deciles could receive an average benefits uplift of about 20%, at no cost to the country.

        I understand that many like as a principle “universal benefits”, but it is also appropriate to ask what this costs those on the lowest incomes.

        • This is largely because the tax system isn’t progressive

        • This is largely because the tax system isn’t progressive

        • This is largely because the tax system isn’t progressive

          • jaime taurosangastre candelas

            Is it not? It seems to me to be so, with nearly £10,000 of income not taxed, then some at 10%, then more at 20%, then yet more at 40%, and for some income at 45%. I think it is progressive, but only in large “lumps”. National Insurance is also reasonably progressive.

            I believe that with modern IT systems, it is not unrealistic to think of many more, finer gradations, perhaps at 2% increments. That would be a lot more progressive. But then, the Government has a poor record of buying complicated IT systems!

            Purchase taxes as you say are not progressive, but unless everyone has a personal chip and pin card with their own level of income programmed into it, to “swipe” before paying, it would be difficult to set differing rates of tax on the same basic commodity (e.g. jar of coffee, litre of petrol, pair of shoes, etc). Apart from the complexity of such an IT system, I imagine it would be prone to fraud, with all purchasing being done on the card of someone within a family who is on a very low income, and not the card of the highest earner in that family.

          • The problem is that the gradations hit those who are on average to low incomes hard – I agree that its not easy to sort out, but when so many people are on wages low enough to need top up benefits…

          • The problem is that the gradations hit those who are on average to low incomes hard – I agree that its not easy to sort out, but when so many people are on wages low enough to need top up benefits…

          • jaime taurosangastre candelas

            It is heart-warming to find myself in agreement with you Mike. This is indeed unusual.

            (Assuming an IT company can be found to design and implement for the Treasury and HMRC a “finely graduated” system that actually works…)

            If you take the current entry point for higher rate tax, and the entry point for the highest level tax i.e. about £35,000 and £150,000, and the % difference (45%-20% = 25%), you need to set a 1% increase in every £4,600 additional income. Maybe call it every £5,000. Give everyone a new tax code “Personal Income Tax” + Number. Anyone below £35,000 is on “PIT20” (or “PIT10” for the 10% rate, on current limits).

            So “PIT35” is 35% on earnings above £35,000, “PIT36” is 36% on £40,000+ earnings, “PIT45” is 45% on £85,000+ earnings, “PIT50” is 50% on £110,000+ etc, all the way up to “PIT58” is 58% on £150,000+.

            You have reduced the tax bill on 3 deciles (5th, 6th and 7th) of Britain, and everyone in deciles 1-4 is unaffected. For decile 8, they are largely unaffected. For deciles 9-10, they pay more, but then they can afford to (this includes me). The overall tax take is up, by I think around 14%. Very few are frightened enough to leave the country.

            There is 14% additional revenue to hand back to our citizens in the lowest deciles. This is around £70 Bn, or £2,000 per citizen in the lower 6 deciles.

          • jaime taurosangastre candelas

            It is heart-warming to find myself in agreement with you Mike. This is indeed unusual.

            (Assuming an IT company can be found to design and implement for the Treasury and HMRC a “finely graduated” system that actually works…)

            If you take the current entry point for higher rate tax, and the entry point for the highest level tax i.e. about £35,000 and £150,000, and the % difference (45%-20% = 25%), you need to set a 1% increase in every £4,600 additional income. Maybe call it every £5,000. Give everyone a new tax code “Personal Income Tax” + Number. Anyone below £35,000 is on “PIT20” (or “PIT10” for the 10% rate, on current limits).

            So “PIT35” is 35% on earnings above £35,000, “PIT36” is 36% on £40,000+ earnings, “PIT45” is 45% on £85,000+ earnings, “PIT50” is 50% on £110,000+ etc, all the way up to “PIT58” is 58% on £150,000+.

            You have reduced the tax bill on 3 deciles (5th, 6th and 7th) of Britain, and everyone in deciles 1-4 is unaffected. For decile 8, they are largely unaffected. For deciles 9-10, they pay more, but then they can afford to (this includes me). The overall tax take is up, by I think around 14%. Very few are frightened enough to leave the country.

            There is 14% additional revenue to hand back to our citizens in the lowest deciles. This is around £70 Bn, or £2,000 per citizen in the lower 6 deciles.

          • jaime taurosangastre candelas

            It is heart-warming to find myself in agreement with you Mike. This is indeed unusual.

            (Assuming an IT company can be found to design and implement for the Treasury and HMRC a “finely graduated” system that actually works…)

            If you take the current entry point for higher rate tax, and the entry point for the highest level tax i.e. about £35,000 and £150,000, and the % difference (45%-20% = 25%), you need to set a 1% increase in every £4,600 additional income. Maybe call it every £5,000. Give everyone a new tax code “Personal Income Tax” + Number. Anyone below £35,000 is on “PIT20” (or “PIT10” for the 10% rate, on current limits).

            So “PIT35” is 35% on earnings above £35,000, “PIT36” is 36% on £40,000+ earnings, “PIT45” is 45% on £85,000+ earnings, “PIT50” is 50% on £110,000+ etc, all the way up to “PIT58” is 58% on £150,000+.

            You have reduced the tax bill on 3 deciles (5th, 6th and 7th) of Britain, and everyone in deciles 1-4 is unaffected. For decile 8, they are largely unaffected. For deciles 9-10, they pay more, but then they can afford to (this includes me). The overall tax take is up, by I think around 14%. Very few are frightened enough to leave the country.

            There is 14% additional revenue to hand back to our citizens in the lowest deciles. This is around £70 Bn, or £2,000 per citizen in the lower 6 deciles.

          • The problem is that the gradations hit those who are on average to low incomes hard – I agree that its not easy to sort out, but when so many people are on wages low enough to need top up benefits…

          • jaime taurosangastre candelas

            Is it not? It seems to me to be so, with nearly £10,000 of income not taxed, then some at 10%, then more at 20%, then yet more at 40%, and for some income at 45%. I think it is progressive, but only in large “lumps”. National Insurance is also reasonably progressive.

            I believe that with modern IT systems, it is not unrealistic to think of many more, finer gradations, perhaps at 2% increments. That would be a lot more progressive. But then, the Government has a poor record of buying complicated IT systems!

            Purchase taxes as you say are not progressive, but unless everyone has a personal chip and pin card with their own level of income programmed into it, to “swipe” before paying, it would be difficult to set differing rates of tax on the same basic commodity (e.g. jar of coffee, litre of petrol, pair of shoes, etc). Apart from the complexity of such an IT system, I imagine it would be prone to fraud, with all purchasing being done on the card of someone within a family who is on a very low income, and not the card of the highest earner in that family.

      • jaime taurosangastre candelas

        You express well why “progressive” benefits are in my belief a good thing. If you look at the raw data in the ONS statistics:

        (see http://www.ons.gov.uk/ons/search/index.html?newquery=household+income+by+decile&newoffset=0&pageSize=50&sortBy=&sortDirection=DESCENDING&applyFilters=true , and select Table 14 about half way down),

        …you can see that even the most well-off households are receiving significant levels of cash benefits. If those were “tapered” with increasing income, they could be focussed more on those on the least income. It depends on how you calculate it, but if those in the top 4 deciles received no cash benefits, those in the lowest six deciles could receive an average benefits uplift of about 20%, at no cost to the country.

        I understand that many like as a principle “universal benefits”, but it is also appropriate to ask what this costs those on the lowest incomes.

      • aracataca

        Well put Serbi (Don’t say that very often). Just one point of correction re: Tiny Tim.I am the proud father of a severely disabled child-His Child Tax Credits were stopped in August this year. You’re behind the curve on that one I’m afraid – the b**tards have already kicked the disabled kids in the face.

      • aracataca

        Well put Serbi (Don’t say that very often). Just one point of correction re: Tiny Tim.I am the proud father of a severely disabled child-His Child Tax Credits were stopped in August this year. You’re behind the curve on that one I’m afraid – the b**tards have already kicked the disabled kids in the face.

      • aracataca

        Well put Serbi (Don’t say that very often). Just one point of correction re: Tiny Tim.I am the proud father of a severely disabled child-His Child Tax Credits were stopped in August this year. You’re behind the curve on that one I’m afraid – the b**tards have already kicked the disabled kids in the face.

      • Hugh

        All that may be true, but if a post states a graph shows “very richest come off proportionately best” when it actually shows the very richest come out proportionately worst, it’s legitimate to point that out.

      • “For the very comfortably off a reduction of hundreds of pounds a week in income often makes little or no difference to their lives”

        There’s an old Labour Party poster that expresses this perfectly – though I expect today’s Labour Party would regard it as being too unfair to the wealthy:

        http://2.bp.blogspot.com/_oCEwFr2yk_g/S94rC9Gy4aI/AAAAAAAAAug/Vb1MjGsVO8g/s1600/sacrifice.jpg

    • aracataca

      Danny Alexander is conforming to type and lying then, is he?

    • aracataca

      Danny Alexander is conforming to type and lying then, is he?

    • aracataca

      Danny Alexander is conforming to type and lying then, is he?

  • That’s not true – I’m doing very well; I scrape the snow from peoples’ drives in winter and clean their windscreens in summer: mop, bucket and a snow shovel is all I need for a business.

  • Pingback: Osborne’s Autumn Statement 2012 | Politics Worldwide()

  • Dave Postles

    Osborne will not do anything – empty promises; we have to do it.

    https://secure.38degrees.org.uk/pages/tax_dodgers_guide

  • What figures do the deciles equate to?

  • What figures do the deciles equate to?

  • What figures do the deciles equate to?

  • franwhi

    john snow showed a much better visual of this on C4 news. This one looks indecipherable to me

  • I think Labour should try a bit of opportunism. Promise to reintroduce the 50p rate and commit all proceeds to increasing the threshold at which 40p is paid on a tax neutral basis. There are swing votes to be won (400,000 people to be taken into the 40% band).

  • Hugh

    “Any take from the poorest makes them the hardest hit in relative terms since they have no discretionary spending power”

    But that’s not what the post was claiming. It was claiming the Treasury’s graph showed the richest came off “proportionately best”. It doesn’t.

  • Hugh

    That would be an excellent point if the post talked about the Resolution Foundation’s research. It doesn’t.

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