Austerity Britain punishing middle income households

The middle fifth of UK households saw their incomes slashed by £1,100 to £24,400 in the year to April, an official report has revealed.

This is more than five times the average real-term fall of £200 across all households, according to the Office for National Statistics (ONS).

The figures, which gauge the impact of taxes and benefits on household incomes, also show that the least well-off consumers have suffered hardest from the indirect tax and duty hikes in Britain’s austerity programme.

The poorest fifth saw indirect taxes, including VAT and duties on alcohol, fuel and tobacco, climb from 28 per cent in the previous year to 31 per cent – almost a third of their average £10,858 disposable income.

At the other end of the scale, the richest Brits saw their indirect taxes rise from 12 per cent to 13 per cent, equating to £8,339 out of a typical disposable income of £63,890.

But in terms of direct taxes, the average household paid £7,500 over the year on outgoings such as income tax and council tax, with the richest fifth paying almost a quarter of their gross income, or around or £19,700, and the poorest fifth paying a tenth of their gross income, or £1,300.

Cash benefits and direct taxes have the impact of redistributing income from richer households to those with lower incomes, which reduces income inequality, the ONS said.

“In contrast, indirect taxes such as VAT and duties on fuel and alcohol take a higher proportion of income from lower income households, and therefore increase income inequality,” it added.

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