In this short briefing paper, IPPR projects the consequences of the changes to tax allowances and the uprating of benefits that were announced in last year's autumn statement.

In the 2012 autumn statement, the chancellor George Osborne announced several important changes to the tax and benefit system, which will come into force in April 2013, including increases in the higher-rate threshold and personal allowance for income tax and changes to the rate of increase for many benefits and tax credits.

Looking forward to 2017/18, IPPR has compared the effects under the proposed changes by comparison with a 'status quo' scenario.

Key findings include:

  • Reforms to welfare made in the 2012 autumn statement will increase the number of children living in poverty by 200,000 in 2017/18. By limiting rises in the value of most working-age benefits to 1 per cent for three years, as opposed to linking their increases to inflation, the amount of support given to low-income families in real terms will fall significantly. This change will push many families and children into relative poverty. The numbers of children, adults and households in poverty will all rise by 200,000.
  • By 2017/18, reforms to personal taxes made in the 2012 autumn statement will provide the greatest benefit to those on middle incomes, but will not reverse the impact of real cuts to welfare. For households in the middle of the income distribution, the increase in the personal allowance will provide a small increase to incomes. But the poorest households gain less from this change, and households in almost all sections of the income distribution will see a greater amount taken away through the 1 per cent cap on benefits uprating than is handed to them via personal tax reform.
  • The combined changes to taxes and benefits will have an impact on families both in and out of work. As a proportion of income, the changes will have the greatest impact on those out of work, who will see their incomes fall on average by 0.44 per cent. But in real cash terms, the amount that families who are in work will lose is larger, at an average of £1.50 a week.