Observations

How could the government perform a gender impact assessment of tax and benefit changes?

Date: 23 June 2011
Authors: James Browne
Publisher: IFS

The Equalities Act 2010 places an obligation on the government to give 'due consideration' to the effects of its policies on gender inequalities. The IFS was asked by the Fawcett society to consider ways in which our tax and benefit microsimulation model, TAXBEN (which we use for our distributional analysis of tax and benefit changes after each Budget) could be used as part of an assessment of the separate impact of Budget measures on men and women. We have today published some simple analysis that does this.

It is straightforward to compare the effects of tax and benefit changes on single men and single women living in households without other adults. The budget measures hit single women somewhat harder than single men, largely because lone parents were net losers from the changes, and most lone parents are women.

It is harder to distinguish the effects of changes on men and women living as couples or in bigger households in part because we don't know how much sharing of resource there is in households, and in part because it is slightly harder to allocate benefit eligibility between individuals in households.

TAXBEN calculates households' tax liabilities and benefit entitlements for each household under different tax and benefit systems, enabling us to calculate how much each household would gain or lose from a particular set of tax and benefit changes. This means that the comparison between men and women is straightforward for single people not living with any other adults. In Figure 1 we compare the average loss from the austerity measures that are being introduced between 2010-11 and 2014-15 as part of the government's deficit reduction package for single adult households according to the sex of the adult.

Figure 1: Impact of tax and benefit reforms on household incomes for single adult households by sex of adult, with average loss for couple and multi-family households for comparison

Impact of tax and benefit reforms - multi family

We find that overall, single women lose more as a percentage of their income than single men largely because the more than 90% of lone parents are women. In fact, single women without children lose less than single men without children, but because lone parents are a group that loses a particularly large amount from tax and benefit changes to be introduced after 2012-13, the average loss for single women as a whole is larger than that for single men.

Figure 2: Impact of tax and benefit reforms on household incomes for single adult households by sex of adult, couple households and multi-family households by presence of children

Impact of tax and benefit reforms - children

 

What can we do about people in couples? One option would be to examine the income of individuals rather than households and examine how this is affected for men and women by changes to direct taxes and benefits. Although such an analysis may not give us an accurate view of the effect of tax and benefit changes on the welfare of individuals, as we would expect at least some degree of income sharing within households, it might still be of interest in itself. Unfortunately, TAXBEN is not currently set up to give entitlements to benefits to the correct member of each couple and it was beyond the scope of this project to carry out the modifications that would have been necessary. Nevertheless, this is something that the government could consider doing as part of an assessment of the effect of tax and benefit changes on men and women.

Any gender impact assessment should also consider behavioural responses to tax and benefit changes. Since taxes and benefits clearly affect the incentives of individuals to do paid work and to increase their earnings, of particular importance here are changes in labour market behaviour. The paper published today also considers how these incentives are affected for men and women by the tax and benefit changes being introduced between 2010-11 and 2014-15. While women, on average, tend to have stronger incentives to do paid work and increase their earnings than men we find that this is little affected by the tax and benefit changes coming that are being introduced between 2010-11 and 2014-15.

In short, there are some simple ways in which the government could have chosen to show that it had undertaken its statutory duty to consider the impacts of its policies on gender inequalities. Performing this analysis need not require large additional resources - all of the charts in the report could be produced by HM Treasury using the data underlying the charts it presents in Annex A of the Budget document. Administrative data available to various government departments may also provide larger sample sizes to examine more robustly the impact of individual policies on smaller groups. That said, what is possible falls a long way short of a full gender impact assessment. Because most people live in households with others, and we don't know how incomes are shared, it is very hard to look at effects separately for many men and women. Furthermore understanding the impact of cuts to public service spending could be at least as important as the changes to personal taxes and benefits that I have considered, but doing this is even more fraught with difficulty.