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The unfairness of cumulative impacts

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The Cumulative Impact of Tax and Welfare Reforms, EHRC, report, poverty, loss of income, Coalition, Conservative governmentWomen lose about £400 per year on average, and men only £30, for example.

The final report from the Equality and Human Rights Commission’s research project looking at the effect of tax, welfare, social security and public spending has been released.

The research looked at all of the changes from the 2010 to 2015 Conservative and Liberal Democrat coalition government and the 2015 to 2017 Conservative majority government.

The report shows the effect of changes to the following parts of the tax and welfare systems: income tax, National Insurance Contributions (NICs), indirect taxes (VAT and excise duties), means-tested and non-means-tested social security benefits, tax credits, universal credit (UC), and the national minimum wage and national living wage (not formally part of the tax-benefit system, but included in this research)

The work focussed on protected characteristics, as set out in the Equality Act 2010. It also looked at other categories, for example, household income and the type of people living in the household.

The analysis shows that, overall, changes to taxes, benefits, tax credits and Universal Credit announced since 2010 are regressive, however measured – that is, the largest impacts are felt by those with lower incomes.

The report also estimates the number of households, adults and children who fall below an adequate standard of living as a result of the reforms to taxes and transfer payments.

The right to an adequate standard of living is a key consideration for evaluating the human rights of the tax and welfare reforms in Britain since 2010.

Those in the bottom two deciles will lose, on average, approximately 10 per cent of net income, with much smaller losses for those higher up the income distribution.

Moreover, the analysis shows that the changes will have a disproportionately negative impact on several protected groups, including disabled people, certain ethnic minorities, and women:

Negative impacts are particularly large for households with more disabled members, and more severely disabled individuals, as well as for lone parents on low incomes;

For some family types, these losses represent an extremely large percentage of income.

For example, for households with at least one disabled adult and a disabled child, average annual cash losses are just over £6,500 – over 13 per cent of average net income;

The impact of changes to direct taxes and benefits is to reduce the income of Bangladeshi households by around £4,400 per year on average;

At an individual level, women lose on average considerably more from changes to direct taxes and benefits than men. Women lose about £400 per year on average, and men only £30, although these figures conceal very substantial variation within both genders;

Women aged 35–44 lose over £2,200 per year from the reforms on average, compared with less than £550 for men;

An intersectional analysis by disability and ethnicity shows that the greatest losers from the reforms are disabled women of ‘Mixed ethnicity’ (with average losses of almost £2,300 per year) and disabled women of ‘Other’ ethnic groups not elsewhere specified in the categorisation (with average losses of £2,350 per year);

Lone parents in the bottom quintile (bottom fifth) of the household income distribution lose around 25 per cent of their net income, or one pound in every four, on average;

On average, disabled lone parents with at least one disabled child fare even worse, losing almost three out of every 10 pounds of their net income.

In cash terms, their average losses are almost £10,000 per year; and

Around one and a half million more children are forecast to be living in households below the relative poverty line as a result of the reforms.

These negative impacts are largely driven by changes to the benefit system, in particular the freeze in working-age benefit rates, changes to disability benefits and reductions in Universal Credit rates.

And the changes are also likely to lead to significant increases in the number of children (in particular) below a minimum acceptable standard of living.

This review of progress since the Equality and Human Rights Commission’s 2015 report also suggests that considerable work still needs to be done to ensure that equality considerations are fully incorporated into decision-making by HM Treasury, and more broadly across the UK government.

To read the full report, The Cumulative Impact of Tax and Welfare Reforms, click here.

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