UK austerity disproportionately punishes the vulnerable
You may have missed it, but this week a substantial academic report was published looking at the effects of UK austerity.
The report found that changes to taxes and benefits since 2010 have disproportionately hurt the most vulnerable. The impact has been worse felt by the disabled, some ethnic minorities and lone parents.
The extensive full report, by the Equality and Human Rights Commission, can be found here, but for those with little time to spare, here are the conclusions.
The cumulative impact of tax and welfare reforms.
Our analysis shows that the changes to taxes and transfer payments (benefits, tax credits and the introduction of Universal Credit (UC)) announced since 2010 are, overall, regressive, however the changes are measured.
Consequently, the largest impacts are felt by those with lower incomes. This is true even when increases in gross earnings from the National Living Wage (NLW) are taken into consideration. Households in the bottom two deciles will lose, on average, approximately 10% of net income, with much smaller losses for those higher up the income distribution. Moreover, the reforms will have a disproportionately negative impact on several protected groups, including disabled people, certain ethnic groups, and women:
- Negative impacts are particularly large for households with more disabled members and individuals with more severe disabilities, and for lone parents on low incomes.
- Losses are extremely large as a percentage of income for some family types. For example, households with at least one disabled adult and one disabled child see average annual cash losses of slightly over £6,500, which represents over 13% 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 considerably more from changes to direct taxes and benefits than men. Women lose around £400 per year on average and men lose only £30, although this conceals very large variations within both genders. For example, women aged 35 to 44 lose over £2,200 per year from the reforms on average compared with less than £550 for men.
- Lone parents in the bottom quintile of the household income distribution experience particularly large average losses from the reforms – equivalent to around 25% of their net income, or one pound in every four.
- Lone parents who are FRS core disabled with at least one disabled child fare even worse on average, losing almost three out of every ten pounds of their net income. In cash terms, their average losses are almost £10,000 per year.
- Couples with children in a similar position (at least one FRS core disabled adult, and at least one disabled child) also experience substantial average losses of slightly under one in every five pounds of net income (a cash average of almost £8,000 per year).
- Lone parents with six or more functional disabilities lose over £11,000 on average from the reforms (slightly over 30% of their net income).
These negative impacts are largely driven by changes to the benefits system; in particular, the freeze in working-age benefit rates, changes to disability benefits and reductions in UC rates.
These benefit changes are also likely to lead to significant increases in the number of households below a minimum acceptable standard of living. A large number of households in vulnerable groups (such as lone parents and couples with children, and households with disabled adults and/or children) lose substantial proportions of their incomes (over 20% in many cases) from the package of reforms to direct taxes and transfer payments, even taking into account increases in gross incomes arising from the NLW.
These reforms took place against a background of a clear and overarching UK Government commitment to deficit reduction; changes to taxes and benefits are obviously an inevitable consequence of this.
However, it does not follow that the precise mix of reforms implemented was inevitable, nor was the impact on vulnerable protected groups that emerged.
The UK is a State Party to the International Covenant on Economic, Social and Cultural Rights (ICESCR), which includes the right to social security. The UN Committee on Economic, Social and Cultural Rights has observed that benefits must be ‘adequate in amount and duration’ to ensure an adequate standard of living; moreover, any reductions (driven, for example, by wider economic policy considerations) should be temporary, necessary and proportionate (Office of the High Commissioner for Human Rights, 2013).
The UK Government’s published impact assessments do not indicate, by themselves, that these obligations have been taken into account; nor do they indicate that the Government paid due regard to the Public Sector Equality Duty (PSED) and the impact of reforms on vulnerable groups.
The reforms have improved the financial incentive to work, but this has mainly been achieved through significant reductions in net incomes for non-working households, rather than significant improvements in net incomes for working households. Indeed, where working households are reliant on in-work support from the tax credit (or UC)
system, this support has been substantially reduced in many cases. We found no strong evidence that improved financial incentives to work had been a major driver of increased employment rates for specific household types.