Election 2024: Families with children have been hit hardest by tax and benefit changes since 2010

Institute for Fiscal Studies finds that changes to the tax and benefit system have reduced benefit entitlements by £2,200 per year on average for 7.6 million households with children

Families with children have been hit hardest by tax and benefit changes since 2010, according to new research from the Institute for Fiscal Studies (IFS).

In The distributional impact of tax and benefit reforms since 2010, the IFS presents the findings from research funded by abrdn Financial Fairness Trust into how changes to the tax and benefit system - in particular to direct taxes (income tax, national insurance contributions and council tax), indirect taxes (VAT and duties), and welfare benefits - have affected households.

Key findings include that families with children have been particularly affected by benefit cuts, with out-of-work families with children losing the most and working families losing out by less but still by a significant amount -

'Reductions in the generosity of tax credits have hit them hard. The so-called 'two-child limit' in universal credit has reduced the incomes of bigger families; child benefit entitlements have been cut for those with incomes over £60,000; and the 'benefit cap', which places an overall limit on benefit receipt, in practice primarily affects families with children.

For example, a single-earner couple earning £80,000 with two children would, in 2010/2011, have been eligible for £3,200 of benefits each year (2024/2025 prices); today they receive nothing. A single parent with two children on average earnings (£35,000) has lost £5,200 a year in benefits - potentially more if they are a renter.'

The research also finds that -

• among the 7.6 million households with children, changes to the tax and benefit system have reduced benefit entitlements by £2,200 per year on average (£17 billion in total);
• taken as a whole, tax and benefit reforms since 2010 have on average reduced incomes for the poorest 40 per cent. For example, the poorest fifth of households have lost an average of £1,800, or 10.2 per cent of income;
• the richest 10 per cent of earners have also lost income, but only around 1.7 per cent of their income (£2,200). However, average and above average earners saw incomes rise by almost £1,300 (2.5 per cent); and
• people over state pension age have seen benefits and taxes go up as a result of policies including the state pension triple lock and have therefore seen little change in average disposable income from tax and benefit changes between 2010/2011 and 2024/2025.

In light of these findings, report author Tom Waters concludes that -

'There has been a steady shift over the past 14 years from cash support for families with children to in-kind support through childcare. But the latter only offsets a small fraction of the former. Taken together with other benefit reforms, this has led to big declines in support for the poorest households. At the same time, tax cuts have boosted incomes for most households… '

In addition, chief executive of abrdn Financial Fairness Trust Mubin Haq said -

'On the one hand, all but the richest tenth will have gained from tax changes since 2010/2011. However, this is offset for the poorest by significant cuts to benefits. The bottom 40 per cent have lost out. It is those with the least who have faced the largest proportional cut to incomes. For the poorest tenth, this is an overall fall of over 15 per cent in income, around £2,000 per year. This is surely key to the picture of rising acute hardship seen in recent years - a trend which must be an urgent priority for the next government.'

For more information, Families with children hit hardest by tax and benefit changes since 2010 from ifs.org.uk

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