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Families in UK getting Poorer 2005-03-31

Posted by clype in Money, Statistics.

British households are growing poorer for the first time since ‘The 1991 Recession’ as The Chancellor of the Exchequer Mr.Gordon Brown’s tax rises take their toll on families’ wealth, government new figures have revealed. Despite the ‘booming’ economy, the nett income of the average family in Britain was lower in 2004/2004 than it was a year earlier. The report is a body blow for The Chancellor, who is tomorrow marking the end of his self-imposed exile from ‘The New Labour Party’s’ election campaign by laying out his benefit to ‘hard-working families’.

[Picture of Alan Johnson]

The Secretary of State for Works & Pensions Mr.Alan Johnson, yesterday published the results of the annual survey asking 25 000 households whether they are better- or worse -off. In previous reports, a strong economy had led to rising wages and a corresponding increase in family wealth. But in 2003/2004 — the year covered by the report — the nation’s families were hit by a double tax ‘whammy’: The Chancellor’s increase of 1 per cent on ‘National Insurance Contributions’ and nationwide ‘Council Tax’ rises which averaged 7 per cent. The tax rises outstripped the average 4.4 per cent pay rise over the year — resulting in a drop in household income of a small — but politically significant — decrease of 0.2 per cent. The figures were seized on by ‘The Conservative & Unionist Party’ yesterday, as proof that The Chancellor’s taxes are taking away the prosperity he claims to have created. The Shadow Work & Pensions Secretary Mr.David Willetts said:

[Picture of David Willets]
‘This is a devastating evaluation of what [New] Labour have done to hard-working families’, ‘No-one should be in any doubt that, if [New] Labour were to win the coming [General] Election, tax rises would bite into family incomes all over again’.

The figures — which ‘The Conservative & Unionist Party’ believes will torpedo ‘The New Labour Party’s’ economy theme — were buried in the small print of ‘The Department of Works & Pensions’ (DWP) statistical publications and would have gone unnoticed had it not been for ‘The Institute of Fiscal Studies’ (IFS). The IFS ‘think-tank’ — used as an independent arbitrator by all political parties — said that the decline in household income was the first since the recession of 1991/1992. It is highly unusual for wealth to drop during an economic boom. The IFS noted that much of the extra money raised in tax was sent towards poorer families in the form of tax credits ‘while the better-off were hit by rises in tax, national insurance and council tax’.

But even medium-income households had seen their income rise by only 0.5 per cent — ‘much smaller than those seen in previous years’. Even the poorest in Britain were hit by complications in the tax credit system, said The IFS. Also, more children are living in families where no adult works — meaning the tax credit system could not help them. This conspired to see child poverty drop by only 3 per cent to 3.5 million across the UK over the year — a far smaller drop than commentators had expected. This means that ‘The New Labour Party’ will now miss its own short-term targets on child poverty. Inequality was, however, reduced; the richest 12 million Britons saw their income fall by 1 per cent, while it rose by 1 per cent in the poorest 12 million.

‘The Treasury’ went on the counter-offensive yesterday — accusing The IFS of looking at the wrong set of figures, and saying that British families have grown poorer only if the self-employed are included. People who work for themselves, it said, ‘experienced considerable pressure on profits during the world slowdown after 2002/2003’ — and if they were not counted, households would be 7 GBP/week better off. Even by The IFS figures, it said, households were only 1 GBP/week poorer. The household income figures are potentially devastating for ‘New Labour’, as it has fitted its entire general election campaign around how The Chancellors’s policies have improved life for ‘hard-working families’. Until now, economic evidence seemed to back up this claim — with Britain enjoying a national pay rise of 4.4 per cent over the year, while inflation remained low, at 1.6 per cent.

But only the household income survey measures the effect on the average British family after taxes are taken into account. This will give ‘The Conservative & Unionist’ opposition ammunition to argue that the average British family is growing poorer under a ‘New Labour Party’ Government.

‘New Labour Party’ aides believe the statistics will not hurt them in the General Election campaign — and that they’ll come out on top if ‘The Conservative & Unionist Party’ take the fight to The Chancellor.


The number of Scottish children living in poverty in Scotland has more than halved since ‘The Scottish New Labour Party’ came to power, it emerged yesterday.

There have also been significant reductions in poverty figures for adults and pensioners, statistics released by ‘The Scottish Executive’ show.

However, the figures for relative poverty — people’s standard of living compared with the average — which ‘Scottish New Labour’ has said it will use as a measure of its anti-poverty policies, are not as impressive.

In 1996/1997, the year that ‘Scottish New Labour’ was elected — and against which progress is measured, 370 000 children in Scotland, or 33 per cent, were living in low-income households. In absolute terms, this fell to 160 000, or 15 per cent, by 2004/2004.

Over the same period, the number of pensioners living in poverty in Scotland has plunged from 260 000 to 70 000. ‘The Scottish National Party’ (SNP) said the figures still fell short of ‘The Scottish New Labour Party’s’ targets in its 2003 Holyrood manifesto, claiming this showed New ‘Labour’s failure to tackle Scotland’s poverty shame’.



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