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Distributional impact of the Spending Review on households

The Government is committed to greater transparency around policymaking, as it is vital that policy decisions are properly scrutinised.  Because of this, the Government has published analysis of the impact on individuals of the benefit and tax credit changes announced in this Spending Review, along with the cumulative impact of these changes and Budget measures. This includes tax, tax credit and benefit changes (such as changes to National Insurance Contributions) that were announced in the March 2010 Budget or earlier, where the Government will be introducing legislation.

The following charts present the impact across the income distribution of these measures. To do this, households are ordered by their income and then divided into 10 equally sized groups called deciles.

The full analysis is published alongside the Spending Review document.

Impact of Spending Review and Budget measures (including pre-announcements) in cash terms (£ per year) by income decile (2012-13)

As a percentage of net income, the overall impact of Spending Review and Budget measures (including pre-announcements) is spread more evenly across the income distribution. However, those in the top decile pay more as a percentage of income than those in the bottom decile.

The full analysis is published in the Spending Review document.

To supplement the existing analysis of welfare and tax decisions, a new methodology has been developed to estimate the impact of spending decisions on households. This is the first time the Government has undertaken such analysis for spending on public services.  Whilst the estimates have limitations and continue to be refined, they show that:

• those in most need will continue to receive the most support from the State in absolute terms;
• relative to the amount they consume, those on the highest incomes will experience the greatest reduction in the services they receive; and
• after combining the impact of tax, benefits and public service spending changes, the highest quintile of earners will make the greatest contribution towards reducing the deficit as a percentage of their income.