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Keeping up or falling behind? The impact of benefit and tax uprating on incomes and poverty

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  • Hancock, Ruth
  • Zantomio, Francesca
  • Sutherland, Holly
  • Hills, John

Abstract

Each year, the Government decides how much to raise benefits and tax allowances. In the UK the basis for these upratings is rarely debated, yet has major long-term consequences for the relative living standards of different groups as well as for the public finances. This paper considers the medium term implications of present uprating policies which vary across parameters of the tax-benefit system. Continuing for 20 years, other things staying the same, would result in a near doubling of the child poverty rate alongside a substantial gain to the public finances. At the same time pensioners are largely protected by the earnings indexation of pensioner benefits and, in time, the basic state pension. We show how difficult it will be to meet the UK child poverty targets unless the greater inequality inherent in the current regime for uprating payments and allowances is redressed.

Suggested Citation

  • Hancock, Ruth & Zantomio, Francesca & Sutherland, Holly & Hills, John, 2008. "Keeping up or falling behind? The impact of benefit and tax uprating on incomes and poverty," ISER Working Paper Series 2008-18, Institute for Social and Economic Research.
  • Handle: RePEc:ese:iserwp:2008-18
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    Cited by:

    1. Alari Paulus & Holly Sutherland & Iva Tasseva, 2020. "Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(2), pages 311-333, June.
    2. Bargain, Olivier & Dolls, Mathias & Immervoll, Herwig & Neumann, Dirk & Peichl, Andreas & Pestel, Nico & Siegloch, Sebastian, 2011. "Tax Policy and Income Inequality in the U.S., 1978-2009: A Decomposition Approach," IZA Discussion Papers 5910, Institute of Labor Economics (IZA).
    3. Maciej Bukowski & Sonia Buchholtz & Piotr Lewandowski & Pawel Chrostek & Agnieszka Kaminska & Maciej Lis & Monika Potoczna & Michal Myck & Michal Kundera & Monika Oczkowska, 2013. "Employment in Poland 2011. Poverty and Jobs," Books and Reports published by IBS, Instytut Badan Strukturalnych, number zwp2011 edited by Maciej Bukowski & Iga Magda, january.
      • Magda, Iga & Bukowski, Maciej & Buchholz, Sonia & Lewandowski, Piotr & Chrostek, Paweł & Kamińska, Agnieszka & Lis, Maciej & Potoczna, Monika & Myck, Michał & Kundera, Michał & Oczkowska, Monika, 2013. "Employment in Poland 2011 - Poverty and jobs," MPRA Paper 50185, University Library of Munich, Germany.
    4. Nuttasorn Ketprapakorn & Sooksan Kantabutra, 2019. "Sustainable Social Enterprise Model: Relationships and Consequences," Sustainability, MDPI, vol. 11(14), pages 1-39, July.
    5. Hills, John, 2013. "Labour's record on cash transfers, poverty, inequality and the lifecycle 1997 - 2010," LSE Research Online Documents on Economics 58082, London School of Economics and Political Science, LSE Library.
    6. De Agostini, Paula & Hills, John & Sutherland, Holly, 2018. "Were we really all in it together? The distributional effects of the 2010-2015 UK Coalition government's tax-benefit policy changes," LSE Research Online Documents on Economics 82895, London School of Economics and Political Science, LSE Library.
    7. Alari Paulus & Iva Valentinova Tasseva, 2020. "Europe Through the Crisis: Discretionary Policy Changes and Automatic Stabilizers," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(4), pages 864-888, August.
    8. John Hills, 2013. "Labour's Record on Cash Transfers, Poverty, Inequality and the Lifecycle 1997 - 2010," CASE Papers case175, Centre for Analysis of Social Exclusion, LSE.
    9. De Agostini, Paola & Hills, John & Sutherland, Holly, 2015. "Were we really all in it together? The distributional effects of the 2010-2015 UK Coalition government's tax-benefit policy changes: an end-of-term update," EUROMOD Working Papers EM13/15, EUROMOD at the Institute for Social and Economic Research.
    10. Figari, Francesco & Matsaganis, Manos & Sutherland, Holly, 2011. "The financial well-being of older people in Europe and the redistributive effects of minimum pension schemes," EUROMOD Working Papers EM7/11, EUROMOD at the Institute for Social and Economic Research.
    11. Callan, Tim & Keane, Claire & Regan, Mark, 2019. "Assessing the distributional impact of budgetary policy: the role of benchmarks and indexation," Papers BP2020/2, Economic and Social Research Institute (ESRI).
    12. Chrysa Leventi & Holly Sutherland & Iva Valentinova Tasseva, 2016. "Improving poverty reduction in Europe: what works (best) where?," ImPRovE Working Papers 16/16, Herman Deleeck Centre for Social Policy, University of Antwerp.
    13. repec:cep:spccrp:22 is not listed on IDEAS
    14. Süssmuth, Bernd & Wieschemeyer, Matthias, 2022. "Taxation and the distributional impact of inflation: The U.S. post-war experience," Economic Modelling, Elsevier, vol. 111(C).
    15. De Agostini, Paola & Sutherland, Holly & Hills, John, 2015. "Were we really all in it together? The distributional effects of the 2010-2015 UK Coalition government’s tax-benefit policy changes: an end-of-term update," EUROMOD Working Papers EM13/15, EUROMOD at the Institute for Social and Economic Research.
    16. Phallapa Petison & Sooksan Kantabutra, 2022. "A Quest for a Sustainable Social Enterprise Model: The Case of Amphawa Chaipattananurak, the Kingdom of Thailand," Sustainability, MDPI, vol. 15(1), pages 1-31, December.
    17. Estévez Schwarz, Diana & Sommer, Eric, 2018. "Smooth income tax schedules: derivation and consequences," EUROMOD Working Papers EM11/18, EUROMOD at the Institute for Social and Economic Research.
    18. André Decoster & Sergio Perelman & Dieter Vandelannoote & Toon Vanheukelom & Gerlinde Verbist, 2019. "Which way the pendulum swings? Equity and efficiency of three decades of tax-benefit reforms in Belgium," Working Papers 1907, Herman Deleeck Centre for Social Policy, University of Antwerp.
    19. John Hills & Alari Paulus & Holly Sutherland & Iva Tasseva, 2014. "A lost decade? Decomposing the effect of 2001-11 tax-benefit policy changes on the income distribution in EU countries," ImPRovE Working Papers 14/03, Herman Deleeck Centre for Social Policy, University of Antwerp.
    20. Pudney, Stephen & Hancock, Ruth, 2010. "The distributional impact of reforms to disability benefits for older people in the UK," ISER Working Paper Series 2010-35, Institute for Social and Economic Research.
    21. Valentinova Tasseva, Iva & De Agostini, Paola & Paulus, Alari & Sutherland, Holly, 2014. "The effect of tax-benefit changes on the income distribution in EU countries since the beginning of the economic crisis," EUROMOD Working Papers EM9/14, EUROMOD at the Institute for Social and Economic Research.
    22. Jinjing Li & Hai Anh La & Denisa M. Sologon, 2021. "Policy, Demography, and Market Income Volatility: What Shaped Income Distribution and Inequality in Australia Between 2002 and 2016?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(1), pages 196-221, March.
    23. LI Jinjing & LA Hai anh & SOLOGON Denisa, 2019. "Policy, demography and market income volatility: What was shaping income distribution in Australia between 2002 and 2016?," LISER Working Paper Series 2019-02, Luxembourg Institute of Socio-Economic Research (LISER).

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