Failing to keep up? The long-term effects of current benefit and tax uprating policies

The ways benefits, tax credits and income tax and National Insurance contribution thresholds are uprated each year have major long-term consequences for the relative living standards of different groups. Continuing current practice for 20 years, other things staying the same, could result in substantial increases in poverty, including a near doubling of the child poverty rate, alongside a substantial gain to the public finances. At the same time, pensioners are largely protected by the earnings indexation of pensioner benefits. We illustrate the distributional implications of alternative targeted policy reforms, financed by part of the resources that would be released through continuing current uprating practices.