Leading charities and trade unions subject possible budget announcements to the Fairness Test - media release

Submitted by Kathryn Busby on 21 June 2010

Fairness Test media release - 21 June 2010

Leading charities and trade unions subject possible budget announcements to the Fairness Test

A group of trade unions and charities, including The Equality Trust, One Society, Child Poverty Action Group, Oxfam, Save the Children, the TUC, and the End Child Poverty Campaign have examined several possible budget announcements for their impact across society, rating them on whether they might pass or fail the Fairness Test that the organisations are calling on Government to adopt.

MORE INFORMATION ON THE FAIRNESS TEST

The test would look at who bears the burden of tax rises or spending cuts, and is intended to ensure government’s deficit-reduction measures do not hit the poorest hardest. The group have asked the government to publish their own Fairness Test assessment of all measures announced in the budget.

Increasing VAT: Fail

Increasing VAT fails the Test because it hurts all families, regardless of income level. The richest tenth of families spend just 7% of their disposable income on VAT; the poorest tenth spend 13.7%. Increasing VAT hits poorest families twice as hard, especially disabled people who need to pay for equipment and bills subject to VAT.

Financial Transactions Tax: Pass

A Robin Hood tax on financial institutions could raise £20 billion in the UK. Banking is 26 times more profitable than other industries. Since the tax would impact mostly on institutional profits, high frequency traders, and financial sector employees, Robin Hood taxes would be highly progressive - especially in comparison with other sources of revenue raising such as VAT.

Cutting or freezing benefits: Fail

Cutting or freezing benefits would not pass the fairness test.  Families surviving on state benefits are already forced to live below the government’s own poverty line and making savings from the most impoverished families will result in many turning to doorstep lenders, loan sharks, or cash-in-hand work to make ends meet.

Capital Gains Tax rise: Pass

A rise in capital gains tax, to bring it back in line with income tax, would impact most on those with more money to spare, so would pass the test.  Currently under 250,000 people pay CGT every year and only one in six households own shares. Uprating CGT would also stop the wealthy using it as a means of avoiding paying their fair share of tax. 

Income tax rises: Pass

Income tax is direct and progressive, particularly if the rise is targeted at those higher up the income scale. It offers much greater scope than most taxes for raising revenue in ways that reduce inequality. The Government should explicitly recognise income tax as one of the fairest options for raising significant additional revenue.

Cutting free school meals: Fail

The cancellation by the new government of a promised extension of free school meals - to primary school children with working parents on low incomes – fails the fairness test. The free meals would have improved children’s health, welfare and capacity to learn. They would have helped make work pay for many parents by allowing them to keep the benefit when taking up work, and would have provided much needed extra weekly income for hundreds of thousands of families. 50,000 children will now stay below the poverty line.

Child tax credits cuts: Fail

Cuts to Child Tax Credits would not pass the fairness test as these have played a key role in supporting the incomes of the poorest, particularly women, and have helped to lift 600,000 children out of poverty.

Cutting benefits advice: Fail

Cuts that result in losses of local services like welfare rights advice fail the Fairness Test. Benefits advisors help hundreds of thousands of people access millions of pounds in benefits each year - money they are owed but not receiving. The Government must be transparent about areas it expects to suffer as a result of cuts to local authority funds, with protections outlined in areas like welfare rights advice.  

Exempt the most severely disabled from Work Capability Assessment: Pass

Ten per cent of existing Incapacity Benefit claimants are disabled people on higher rate care Disability Living Allowance. Forcing these 200,000 people to undergo a Work Capability Assessment would cost £60 million and is unnecessary as they would qualify for the support group of Employment and Support Allowance. People moved to the support group can still access work related support and would not lose out on opportunities.

For more information please contact Will Horwitz on 07966 344506 or will.horwitz@equalitytrust.org.uk or Tim Nichols on 020 7812 5216 or tnichols@cpag.org.uk


Notes for editors

The group is made up of:
End Child Poverty campaign
Child Poverty Action Group
TUC
Save the Children
Oxfam
Family Action
RADAR
Equality Trust
One Society
Community Links
UK Women’s Budget Group
Church Action on Poverty
London Play

The Fairness Test would be an assessment of the impact of any tax rises or spending cuts on inequality of income, assets, or access to services, carried out by government and published alongside every proposal.

Before the election, Nick Clegg signed up to the Fairness Test, and David Cameron expressed his support for the concept of fairness in tackling the deficit. We are awaiting a reply to our second letter, asking the coalition government to clarify their position.