Who has been hit hardest by austerity? When it comes to income levels, the story is reasonably clear, if nuanced. Analysis by the Treasury suggests the impact of changes to taxes and benefits has been broadly regressive. The more you earn, the less you’ve lost as a proportion of your income, except for top earners, who have been hit relatively harder. This isn’t surprising – benefit cuts and VAT rises have hit the poor, income tax cuts have helped the middle and upper middle, while pension changes and child benefit withdrawal have affected the richest.
But it’s not just about income. Inevitably, tax and spending decisions affect different groups – women, men, disabled – differently. But the Treasury has never published any analysis of the cumulative impact of changes to tax and spending on these groups. Meanwhile, the Department for Work and Pensions has persistently rebuffed calls from disabled people’s organisations, not to mention the independent Social Security Advisory Committee, for an assessment of the impact of welfare changes on the disabled.
As part of its mandate to ensure the impact of policy changes on “protected groups” is taken into account properly, the Equality and Human Rights Commission asked analysis firm Landman Economics and the National Institute of Economic and Social Research to produce just such a “cumulative impact assessment”. Our objective was twofold – to show it could be done and to see what it tells us.
What did we find? First, that at least for some groups, modelling the cumulative impact is feasible and practicable – at least by gender, age, disability and ethnicity. Our model isn’t perfect and could be improved, but it can be done. Second, to get a full picture of the impact, income matters too. For example, it’s not particularly sensible to just look at the impact on men compared with women, as opposed to comparing low-income men with low-income women.
We found the impact of tax and welfare reforms are more negative on families that have at least one disabled person, particularly a child, and especially for low-income families. This is not surprising, given the significant cuts to working-age welfare and the high proportion that goes to disabled people, particularly those on low incomes. Poor families that have a disabled adult or child lose perhaps five times as much proportionally as better-off able-bodied families.
We also found that women lose more from the direct tax and welfare changes than men. This is mainly because women receive a larger proportion of benefits and tax credits relating to children and these comprise a large proportion of the social security cuts between 2010 and 2015, although these results depend on how households share income in practice.
Perhaps surprisingly, households with younger adults do better than average; although the impact of benefit changes is relatively uniform across groups, younger adults benefit more from changes to direct taxation (the increase in the personal allowance) than any other group.
Looking at spending on public services (rather than tax and welfare), black and Asian households lose out more than other groups, largely because they are disproportionately likely to participate in further and higher education, and (for black households) social housing.
We are not arguing that the government’s austerity measures are targeting disabled people, women or ethnic minorities. And our report says nothing about whether the underlying policies are justifiable or not. It is inevitable that impacts will vary across groups. Welfare reductions, in particular, will hit hardest those groups most dependent on welfare payments, so some disproportionate impact is unsurprising. Alternative models might give different results, but this broad picture will remain.
The point of the report then is transparency in the pursuit of better policymaking. Ministers, civil servants and the public ought to know if government policies are having a disproportionate impact on particular groups. Our report shows it is possible to produce such analyses and we believe that if this were done as a matter of course, policy could be better and fairer.