Is this the least ‘family friendly’ government ever?

By Tim Horton and Howard Reed

Analysis we published following last week’s budget looks at the impact of the coalition’s tax and benefit changes on low-income families with children. We look at the reforms that will take place by April 2012 and compare this to the system the coalition government inherited in April 2010.

One striking finding is that many single-earner families will be losers when you weigh up any gains from cuts to income tax and national insurance against losses from the VAT rise and cuts to tax credits and child benefit.

A key reason why single-earner families do worse from these reforms relative to two-earner families is that financial support is being switched from tax credits (which are paid to households) to income tax cuts (which are paid to individuals - and so give two-earner households double the support of single-earner households).

As the table below shows, one-child single-earner families earning £10,000 and over will all see their financial position deteriorate. For example, by April 2012, compared to April 2010:

• A one-child family with a single earner working full-time on the minimum wage (annual gross income: £12,000) will lose £79 a year;

• A one-child family with a single earner on £16,000 will lose £200 a year

Note that we have calculated the loss from VAT by assuming that households spend 50 per cent of their disposable income on VAT-able goods; other estimates of losses from VAT have been even larger than this.

Losses from the coalition’s major tax and benefit changes by April 2012 (compared to April 2010) for low-income single-earner families with one child. (All these figures are expressed in this year’s prices and take into account the effect of RPI inflation on tax & NICs thresholds and on benefit and tax credit rates - given RPI indexation was the default in April 2010.)

A further point about the coalition’s reforms is that by switching support from tax credits (mostly paid to households with children) to income tax cuts (paid to households both with and without children), the government are also shifting support away from families with children and towards families without children (many of whom gain from these reforms). This is essentially beginning to unwind Labour’s significant increases in financial support for families with children.

All of which leads us to pose a question; given that these huge cuts to tax credits and child benefit come on top of cuts to Sure Start and moves to scale back flexible working rights; is this the least family-friendly government ever?