Poorest hit hardest by tax policies

By the time of the next British general elections, low-paid workers would be losing up to four times more from the VAT increase than any gains from the increase of the personal tax allowance, the Express & Star newspaper today reported.

It quoted The British Trades Union Congress (TUC) saying, a household having an average weekly income of £195 would gain £1.09 from increases in the personal tax allowance by 2015, but would lose £4.26 a week through the increase in VAT to 20 per cent from January 2011.

Families across all income levels would lose more from the VAT rise than what they would gain from the increase in the personal allowance and changes to National Insurance, the TUC said.

According to TUC general secretary Frances O'Grady, contrary to ministers' claims, the biggest losers from the government's tax policies would be the poorest households, the newspaper reports.

She said it was a myth to claim that raising the personal allowance would benefit those worse off in society, adding that low-income families would gain practically nothing from the increase in the personal allowance but would continue to lose significantly from the rise in VAT - in some cases over 6 per cent of their income.

Those who would fare best through the new personal tax allowance would be richer households, although even they too would lose out overall as a result of the VAT rise. She added, if the chancellor really wanted to make a difference to family budgets, he needed to look at reversing the VAT hike and cuts to vital tax credits and benefits.

According to shadow treasury minister Catherine McKinnell, David Cameron and George Osborne gave with one hand, but took much more with the other and for all their boasts about small rises in the personal allowance, for millions of families this was massively outweighed by the government's VAT rise. She added, the budget would need to cancel next month's tax cut for millionaires and instead cut taxes for people on low and middle incomes.