Budget should raise new tax revenues from those who can afford it, not cut support further from those who can’t, says Oxfam

16th Mar 2012

Charity says cuts to public services and welfare are unfairly impacting the 'squashed bottom'

Ahead of next week's Budget announcement, Oxfam has urged the Chancellor to introduce more progressive taxation policies to raise new revenues from wealthy individuals and use the proceeds to limit cuts to public services and the welfare system.

The charity believes the Government needs to re-balance its deficit reduction strategy, putting more emphasis on raising new tax revenues from those who can afford it and relying less on cuts that disproportionately impact the poorest in society, including the 1 in 7 of UK workers who are currently classed as living below the poverty line.

With debate ahead of the Budget focused on the 50p top rate of tax, Oxfam argues that offering any form of tax break to higher earners at a time when working tax credits are being cut for many on low incomes would be a "recipe for a more divided Britain".

The director of Oxfam's UK poverty programme, Chris Johnes, said: "The Government is aiming to make up nearly three quarters of the deficit with spending cuts, which disproportionately harm the poorest in society. It's grossly unfair that ordinary people are bearing the brunt of deficit reduction, whilst the wealthy financial sector is still pocketing billions in bonuses."

One form of progressive taxation that Oxfam is championing is a Robin Hood Tax on financial transactions, which the charity believes could raise up to £20 billion in the UK to invest in international development and climate financing as well as funding poverty reduction at home.

Analysis in Oxfam's upcoming report on UK poverty, The Perfect Storm (working title), shows that for every pound the Government is seeking to raise in new taxes during this parliament to put towards reducing the deficit, it is seeking to save £3 through budget cuts. Research suggests that cuts planned to public services could be equivalent to the loss of a fifth of income for the poorest ten per cent of the UK population [1], whilst welfare payments for working age people will be reduced by up to £18 billion a year by 2015 [2].

"People on the lowest incomes are being hit from all sides, with rocketing living costs, stagnating or falling wages, rising unemployment and cuts to benefits such as working tax credits and support services when they are most needed," said Johnes. "These people are not the squeezed middle; they are becoming the squashed bottom."

Oxfam's report will demonstrate how the livelihoods of the poorest people in the UK are being stretched to breaking point by an accumulation of factors, including:

 -  Soaring living costs: In the past two years, the price of food has increased by 7.7 per cent and average private sector rents have risen by 8.3 per cent. Meanwhile the costs of electricity, gas and other fuel prices have rocketed by 21.2 per cent [3].

Falling or stagnating wages: Last year, earnings of Directors and Chief Executives went up by 15 per cent, while the annual pay of waiters and waitresses fell by 11.2 per cent and the earnings of cleaning staff fell by 3.4 per cent [4].

Lack of jobs paying a living wage: One in seven working age adults, 4 million people, have a job, but are still living below the poverty line [5].

 - Government cuts: Cuts in  Working Tax Credits will mean more than 200,000 working families will lose up to £3,870 per year, with the average qualifying family expected to lose £2,000 a year because of benefit cuts [6].

A survey of charity partners of Oxfam's UK poverty programme carried out in support of The Perfect Storm report reveals that three quarters of these institutions have reported an increase in demand for their services, whilst two in five have experienced a cut in their government funding.

Johnes concluded: "The Governor of the Bank of England recently warned that we are seeing the biggest sustained squeeze on living standards since the 1920s. The Government must go further to redress rising income inequalities in the UK, with a Budget that protects the squashed bottom rather than those at the top. To do the reverse would be a recipe for a more divided Britain."

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For more information, or to arrange an interview with an Oxfam spokesperson, please contact: Sarah Dransfield, Oxfam Press Officer, on 01865 472269, 07767 085636 or email: sdransfield@oxfam.org.uk

 Notes to Editors:

 The Perfect Storm report will be published in May 2012

 [1] TUC

[2] HM Treasury Spending Review October 2010

[3] Food & fuel figures: Consumer Price Index; Housing figures: LSL Buy to Let Index, February 2012 and February 2011

[4] 2011 Annual Survey of Hours and Earnings

[5] Department for Work and Pensions, Households Below Average Income: An analysis of the income distribution 1994/95-2009/10 (2011), p.158.

[6] TUC