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2.5.3 The impact of tax, tax credit and welfare benefit changes by income decile
This section compares how children whose families are from different income groups
have been affected by tax-benefit reforms. Figure 2.3 shows the average losses in
cash terms for families with children divided into income deciles, modelled using the
2010-11 Family Resources survey. Families with children are divided into ten deciles
representing equal proportions of the population, from the ten percent of families with
the lowest incomes (decile 1) to the richest ten percent (decile 10). Figure 2.3 shows
the average cash impact of the tax - benefit changes in each income decile.
Figure 2.3. Families with children by income decile: Impacts of tax-benefit reforms in
2010-15 in cash terms
Looking just at the benefit and tax credit measures, average cash losses from these
are roughly constant over the bottom half of the income distribution, averaging
around £30 to £35 per family. The poorest families lose more from benefits on
average than families in the middle of the income distribution, but for tax credits the
opposite is the case. Families in the top four deciles lose less on average from the
benefit and tax credit cuts than families further down the distribution.
The income tax and NICs changes have a positive impact on the bottom eight
deciles with the effects being biggest in the middle of the income distribution. The
impact of income tax and NICs changes in the top 20 percent of the income
distribution is negative due to a combination of increases in employee and employer
NICs rates and below-inflation increases in the higher rate income tax threshold.
Office of the Children’s Commissioner: Child Rights Impact Assessment of Budget Decisions
June 2013 28