Policies of the Conservative Government to be more regressive than those of the Coalition

With only three days until the Budget, a new briefing launched today by the UK Women’s Budget Group shows that the policies of the Conservative government (2015-20) are projected to be more regressive, and to hit women, harder than the policies of the Coalition government (2010-15).

The study used the Landmann microsimulation tool to model the impact of changes to tax and benefits as well as public spending^[1] on households, disaggregating by income and household type, for the five years of the Lib-Dem/Conservative coalition government and for policies announced thus far by the Conservative government that took office in May 2015.^[2]

Key findings are:

• Austerity policies that are planned for the 2015-20 Parliament have an even more regressive distributional impact than those implemented in the 2010-15 Parliament
• The living standards of the 10% lowest income households is cut by an average of 21% annually in 2020, more than five times as much as the cut to living standards for households in the top decile
• Women are hit harder than men and households headed by women such as lone parents and single female pensioners are hit hardest, both being about 20% worse-off on average in 2020
• The full implementation by 2020 of Universal Credit is the main factor behind the deepening of the regressive cuts over this Parliament
• Besides cuts to household incomes, the effect of central government cuts on school and social care budgets is the main factor behind the drop in living standards, mainly for the bottom half of the income distribution

Commenting on the findings, Dr Jerome De Henau, one of the authors of the study said:

“Women and those on low incomes have already borne the brunt of the first wave of austerity under the Coalition government and it is worrying to see that under the Conservative government they will again be shouldering a disproportionate burden.

Much was made of the supposed ‘u turn’ on tax credits in the Autumn Statement. Yet, our research clearly shows that the continued implementation of Universal Credit, with its much lower thresholds, means that low income households and women will face a severe cut in income and living standard. The worst affected households – single female pensioners and female lone parents stand to lose on average 20% annually.

Pursuing deficit reduction in this way is a political choice, not a necessity. It also doesn’t make good economic sense. Even the large international institutions, including the OECD and IMF, have called on developed countries to ease up on austerity and invest instead.

At the Women’s Budget Group, we have shown that investing in the social infrastructure – the care industries – not only delivers better social outcomes but also greater economic returns than either austerity policies or comparable investment in the physical infrastructure.

Research published by us last week showed that investing 2% of GDP in the care economy would create up to 1.5 million jobs, almost twice as many as a comparable investment in the construction sector, and go a long way to addressing the care deficit.^[3]

We call on the Chancellor to ensure that his Budget on Wednesday delivers for both men and women, and lifts the incomes of the poorest household. Investing in the social infrastructure to create well paid jobs would substantially lift incomes and reduce gender equality.”

The full assessment is available to view and download below:

^[1] 72% of all public spending is included in the model

^[2] The model was developed by Howard Reed, Director of Landmann Economics and member of the Women’s Budget Group

^[3] New study shows that investing 2% of GDP in care industries could create 1.5 million jobs, WBG