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Budget 2001 Thursday, 1 March, 2001, 16:36 GMT
Winners and losers under Labour
By the BBC's economics reporter Dharshini David

Our incomes may have risen, but the chancellor is often accused of using this as an opportunity to siphon off even more in taxes.

Certainly, the Treasury's own figures show that, as a nation, a greater proportion of our incomes is spent on tax now than in 1997.

The tax burden - which the Treasury defines as taxes and social security contributions, less tax credits, as a percentage of GDP - has risen from 35% to over 37% during this period.

But, the chancellor claims, much of this rise is due to higher oil prices, which means that companies producing North Sea oil pay more tax.

Certainly, more of the increase in the tax burden seems to have fallen on companies than households. And the Treasury predicts that the tax burden is set to fall after next year.

The Office of National Statistics publishes an alternative measure of the tax burden, which doesn't include tax credits, and is internationally comparable.

This also shows that the tax burden has risen in the last four years- but puts it closer to 38%. Moreover, by this definition, the tax burden will continue to rise in the next few years, given the measures the chancellor has already announced.

Nevertheless, the tax burden here still compares favourably with that in the rest of the EU where it tops 40% on average, according to the OECD. However, it is far above the 30% or so seen in the US.

Who is better off?

While the overall tax burden has gone up, not everyone is worse off by any means. In fact, many households are significantly better off.

The impact has been in line with the government's policy of raising the incomes of the poorest families.

According to experts at the Institute of Fiscal Studies, the poorest 10% of the population have seen their incomes rise by almost 9%, thanks to Labour's tax and benefit measures.

The richest 30% of households have seen their incomes fall on average. But their loss has typically been less than 1% of their incomes.

But few of us know exactly where we stand in the income pecking order. Instead, its probably more meaningful to look at this by type of household.

According to IFS, the main winners have been families with children, who could be as much as 18.70 better off.

Pensioners also gain, and the IFS calculate they could have seen up to about 6 per week more.

The losers, therefore, are typically those households without children or pensioners. The rise in excise duties - such as that on tobacco and petrol has left them worse off, on average.

They may have taken an additional blow from the withdrawal of mortgage interest relief and married couple's allowance.

Gordon Brown has said he intends to target the worst-off in the forthcoming Budget. If so, the pattern of "winners and losers" is unlikely to change.


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27 Jan 01 | UK Politics
05 Jan 01 | UK Politics
09 Dec 00 | UK Politics
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