IFS: households not better off from Coalition yet
Thinktank says much-trumpeted claim households are £900 wealthier is reliant on this year's forecasts.
The Government’s claim that households are on average £900 better off isn't actually true yet, says the influential thinktank the Institute for Fiscal Studies (IFS).
As part of the IFS's post-Budget analysis, it revealed that this figure is entirely reliant on Government forecasts for the rest of the year being hit, with the average household having seen no “actual increase” up to now.
It also said the tax and benefit changes implemented by the Coalition over its term in office have hit the poorest hardest.
Older people have done pretty well, with average incomes among pensioners rising, but there have been particularly big income falls for workers in their 20s.
Its director Paul Johnson is warning that whoever is Chancellor after the General Election “will be left with plenty of work still to do”.
As for the Budget itself, Johnson called on the Chancellor to “be more explicit” about how he actually thinks he can deliver an extra £17 billion from a combination of welfare spending cuts and tax avoidance measures.
The reduction in the pension lifetime allowance was described as a “further erosion of a rather sensible part of the tax system”, with the suggestion that reducing the “extraordinarily generous treatment of employer contributions by the National Insurance system” would be a better way to reduce pension tax relief.
While allowing pensioners to sell their annuities appears a sensible move, Johnson cautioned that it’s still unclear what effect it will have in practice. He highlighted that those who are most likely to want to cash in their annuity are those who know they don’t have long to live, in which case annuity firms are unlikely to want to pay much for that annuity.
There was some praise though for the added flexibility to ISAs and the removal of tax on the first £1,000 of savings interest, which were described as “welcome simplification”.
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