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change in income (£/week)
adults who are more likely to be in employment than in couples with children, many
of whom have only one earner. The incentive to enter employment for second
earners, who in practice are mainly women, is relatively weak for families with
children on low-to-middle incomes due to the Working Tax Credit taper, and this
situation does not improve overall under Universal Credit. 38
The negative impacts of increases in indirect taxes on living standards are bigger for
couples than for single adult families. However, the fact that a large proportion of
child-related expenditure under VAT is zero-rated means that the impact of the
indirect tax measures (of which the most important in revenue terms is VAT) is not
worse for families with children than for childless families. 39
Universal Credit has on average a small positive impact for families with children but
this only offsets a small fraction of the losses arising from cuts to benefits and tax
credits before UC is introduced and there are both losers and gainers.
Figure 2.1: Breakdown of impacts of reforms in 2010-15, by family type, cash
terms
£20
single
adult, no
children
lone
parent
family type
couple, no
children
couple,
children
single
pensioner
couple
pensioner
£10
£0
-£10
-£20
-£30
-£40
Universal Credit
indirect taxes
income tax/NICs
tax credits
benefits
TOTAL
-£50
-£60
-£70
38 Section 6 of the background document includes detailed analysis on how changes in tax and
benefits have affected how much employment pays.
39 Zero-rating food and many child related commodities is a feature of the UK indirect tax system that
makes it more child-friendly and less regressive than that of many other countries. See Caren Grown
and Imraan Valodia (eds.) (2010) Taxation and Gender Equity: A Comparative Analysis of Direct and
Indirect Taxes in Developing and Developed Countries Routledge, IDRC
Office of the Children’s Commissioner: Child Rights Impact Assessment of Budget Decisions
June 2013 26