Recession hitting middle-income families the most

By Louisa Peacock

The middle fifth of households saw disposable incomes drop by £1,100 to £24,400 in the year to April, quadruple the average fall of £200 to £30,300 across all households, the report from the Office for National Statistics (ONS) revealed.

The figures, which track family incomes after tax and benefits, showed that the poorest members of society have borne the brunt of tax and duty rises under Chancellor George Osborne’s austerity measures.

The poorest fifth saw the chunk of average disposable incomes they spent on indirect taxes, such as VAT and duties on alcohol, fuel and tobacco, rise from 28pc in the previous year to 31pc, or £3,365 out of £10,858.

The richest tier saw the proportion they spent on indirect taxes rise from 12pc to 13pc, or £8,339 out of £63,890.

This means after indirect taxes the richest fifth had post-tax household incomes that were more than seven times those of the poorest fifth, the ONS added.

While the proportion of household income paid in indirect taxes increased for all groups due to the increase in the standard rate of VAT from 15pc to 20pc, the poorest were hit the hardest.

The amount of indirect tax each household pays is determined by how much they spend on goods and services that attract these taxes, the ONS added.

However, the figures showed that average households paid £7,500 per year in direct taxes such as income tax and council tax, with the richest fifth paying 24pc or £19,700 of their gross income, while the poorest fifth paid 10pc or £1,300.

The amount of cash benefits, such as tax credits, housing benefit and income support, tends to be higher for poorer households than for richer households, the ONS said.

The largest cash benefits were received by families in the second fifth of households, at £8,300 on average, compared with £7,000 in the bottom group.

The richest fifth only received £2,100 in cash benefits on average, with the main source being the state pension. Telegraph