Two: Benefits, pensions, tax credits and direct taxes

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This chapter examines changes in social security and direct tax policies, spending levels and their redistributive effects in the period since 2007. It discusses the importance in particular of the protection of the real values of benefits and tax credits in the years immediately after the crisis, but then the divergence between the favourable treatment of pensions compared to working-age benefits. Real spending on pensioner benefits grew under both Labour and Coalition governments, but those related to children started to fall under the Coalition. The combination of generous increases in tax-free personal allowances for income tax and selective cuts in working-age benefits under the Coalition was regressive. The policies adopted by the incoming Conservative government will continue and intensify these effects. The effects of the Coalition’s major Universal Credit and ‘pension freedom’ reforms remain uncertain

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