April 9, 2008
Will middle England lose out from the 2007 Budget?
There has been a lot of fuzzy language used to describe those that will be punished by Gordon Brown’s 2007 Budget. News reports have suggested it will hit “low-paid workers” — Labour’s core vote. The implication has been that “middle-England” swing voters will benefit or go unscathed.
The full picture is more complicated. More than a third of middle income households will be worse off, according to this excellent Joseph Rowntree Foundation report on an unrelated subject. Holly Sutherland led a team that calculated the impact of the 2007 Budget. Her analysis largely tallied with the IFS (who own the only other non-governmental model to do this kind of analysis) but she chose a slightly different way of presenting some of the information (see the chart below).
While about a quarter of households will lose out from the budget, this disproportionately hits middle income households. A smaller percentage of rich and poor households will see their incomes fall (although they could lose more).
When journalists describe “low paid workers” they are also describing households that could have a combined income of £36,000 — which puts them right in the middle of the household income distribution curve. These couples, who don’t have kids, will soon feel the pinch in their monthly pay packet.
Some Labour MPs have suggested to me that unrest over the 10p rate is a matter of principle with limited electoral implications. This graph suggests that may be wishful thinking.
