Low-income households and the elderly have been badly hit by the recession, according to research conducted by the BBC and the Institute for Fiscal Studies.
Although everybody in the UK has been affected, the country’s poorest households have seen their income decrease by 2.1% in the last three years.
Stephanie Flanders, the BBC News economic editor, pointed out that so far the recovery has put more pressure on household budgets than the recession did. Already struggling families have been hit by a drop in income of £182 a year instead of the £428 increase they would have enjoyed if economic uncertainty were not present.
Pensioners have suffered even more, seeing a loss in income of £456 a year plus a cut in their winter fuel allowance.
Tax and benefit changes introduced between 2008 and 2011 have reduced the real income of the very rich and the very poor, she concluded.
Meanwhile, the National Institute of Economic and Social Research recently said that the pensions and healthcare costs of ‘baby boomers’ will cost tax payers between £80bn and £90bn extra every year in the future.
The report discovered that the over 40s, who have been benefiting from state pay-as-you-go benefits, have created a multi-trillion pound commitment that needs to be met by future generations. A typical 65 year old has received £223,183 more in net state subsidy than the tax paid and a newborn will have to pay £159,668 in taxes during their lifetime to compensate.
The research assumes the government needs to balance the books in the long-term and is based on current projections and policies. The projected shortfall is primarily driven by the increasing pressure on health and pensions rather than a rise in the fiscal deficit caused by the economic crisis.
In order for public finances to get back on a sustainable footing, taxes, including income tax, would need to increase by an additional 6% of GDP. This would provide the Treasury with an extra £88 billion or 16% of total tax receipts.
© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.
Image: All For One by jeff_golden
