George Osborne's austerity programme will cut the living standards of Britain's families by more than 10% over the next three years and the study found that the richest 10% of households will see income cut by just over 4% on average between 2011 and 2014 by tax and benefit changes. The Institute for Fiscal Studies says the poorest families will lose more as a result of the squeeze on spending. the IFS, the UK's leading experts on the public finances, concludes that the chancellor's strategy will result in greater inequality and rising child poverty.
The IFS analysissays the most severe downturn since the interwar years will "cast a very long shadow in the UK", with the poorest 30% of households especially hard hit.
"Declines in living standards look set to continue until at least 2013-14. If realised, this would mean that average living standards had not grown in well over 10 years, making it one of the worst decades for changes in living standards since at least the second world war." According to the IFS, the squeeze on living standards will be the result of earnings failing to keep pace with prices, as well as the tax and benefit changes announced by the government to tackle the UK's record peacetime budget deficit. "Welfare cuts and tax rises will act to reduce household incomes, and those with the lowest incomes are clearly set to lose the most from these reforms as a percentage of income (with the important exception of those with the very highest incomes). This is likely to increase poverty, other things being equal, offsetting some of the falls in poverty over the past decade."
The IFS said the poorest families also lose more as a result of the squeeze on public spending. "Losses as a percentage of net income (plus the value of benefits in kind) are between 5% and 6% at the bottom of the distribution, which is similar to the magnitude of the losses for those on the lowest incomes from tax and benefit reforms."
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