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Debt fears rise as Budget hits poor the hardest

Debt fears rise as Budget hits poor the hardest

Category: Debt

Updated: 08/03/2011
First Published: 25/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It is the poorest families rather than the richest who will be hit the hardest by the coalition Government's first Budget, research from a think tank has revealed.

Despite the Chancellor's claims that the Budget unveiled in June would impact on the wealthiest the most, the Institute for Fiscal Studies (IFS) suggests families with children are the ones who will be hit by the measures, with the poorest families set to lose the most.

As a result of the changes, it is predicted that the worse off families could lose over 5% of their income.

The IFS said that the Government's analysis of the Budget had excluded the effects of some cuts to housing benefits, the Disability Living Allowance and tax credits that will tend to hit the poorest parts of society than the richest.

Taking into account the cuts in benefits, the IFS said the changes were clearly regressive as, on average, they hit the poorest households more than those in the upper-middle of the income distribution.

Low-income households of working age lose the most as a proportion of income from the tax and benefit reforms.

Those who lose the least are households of working age without children in the upper half of the income distribution, as they do not lose out from cuts in welfare spending.

They are also the biggest beneficiaries from the increase in the income tax personal allowance.

The analysis will fuel fears that increasing amounts of people will find themselves with money problems in the coming months and years.

Seeking debt advice before things can get out of hand is vital.

Ppotential sources of help and guidance include the Consumer Credit Counselling Service, the National Debtline and the Citizens Advice Bureau.

"The coalition has committed to ending child poverty by 2020, but its cuts are hitting the poorest families hardest," said Fiona Weir, a spokesperson for the End Child Poverty campaign.

"It's not fair that children should have to pay for the cuts and shocking that the poorest families are bearing the brunt of them.

"The coalition must re-consider its cuts, including changes to Housing Benefit and uprating benefits.

"The spending review will need to show clearly how the Government will deliver on the commitment to ending child poverty, ensuring that cuts fall on those most able to pay."

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