Reforms to squeeze the Nation’s Budgets

Published on 1 January 1970 by Raffick Marday

Families will be £200 worse off following the tax and welfare changes which are coming into effect this month, new figures reveal.

According to Credit Action, the 45 significant changes to be enforced by the Coalition Government as part of their reforms will affect everyone.

Changes to Income Tax thresholds, National Insurance, Tax Credits, Fuel Duty and Child Benefit are included. The Institute for Fiscal Studies has warned that the average household will be £200 a year worse off following these changes, and families will not be the only ones affected.

This cut to households’ budgets follows the £480 cut the average household felt after the changes to indirect taxation in January 2011, the IFS previously stated.

“The 45 major changes that we have identified will affect everyone – there really is no way to avoid them,” said Joanna Parsley, Credit Action associate director.

“Changes to tax and welfare benefits coupled with rising energy and food prices, and fears over potential interest rate rises and further job losses, mean that household budgets in 2011 will continue to be squeezed.”

The drop in the Higher Rate income tax threshold to £42,475 will see 750,000 more people paying tax at 40 percent.

All National Insurance contributions will increase by one percent and Fuel duty will increase by 1p per litre above inflation.

The Consumer Price Index is to be used to uprate all benefits, tax credits and public sector pensions, rather than the Retail Price Index, likely to result in less generous benefits.

This extra strain on people’s budgets, along with rising unemployment and high inflation is expected to lead to a sharp rise in personal debt problems, the Consumer Credit Counselling Service (CCCS) warns.

The National debt charity said thousands of people could end up in debt due to the current economic climate, and unemployment is a major factor in personal debt problems.


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