Forget all the political spin: are you richer or poorer under Labour?

WHETHER your family has been better or worse off under Labour will be a major influence in deciding how to vote. But how do you know?

The Institute of Fiscal Studies has cut through the spin and party politics to calculate in hard numbers who has won and who has lost since 1997.

In crude and generalised terms, poorer families with children have gained along with pensioners, while those with a household income of 19,700 and above are worse off, by an average 1,411.93 annually. Low-paid childless adults have also been hit.

But the picture is complex. Regions have fared differently. While some of the poorest have been lifted out of poverty, others have fallen down the ladder, and find themselves newly at the bottom of the heap.

Scotland is ground zero when compared with the other regions. While some, such as Northern Ireland, north-east England, Yorkshire and Humberside, and the West Midlands have been slightly better off under Labour's reforms, others such as London, south-east and south-west England and Wales have been worse off. Scotland has neither gained nor lost relative to its neighbours.

So what were the major tax and benefit changes under Labour? The basic rate of income tax has fallen from 23p to 20p, while the married couples and mortgage tax relief have been abolished. Tax thresholds have not been increased, so that more people pay higher rates of tax.

National Insurance has increased substantially. It is now payable on all earnings, rather than a limited band, and the rate has increased. There has been a new regime for stamp duty on property with the tax break on share dividends removed for pension funds and charities.

Finally, council tax soared by 4 per cent each year between 1997 and 2001 on top of the increase in the retail prices index, and by 5.2 per cent each year between 2001 and 2005 on top of RPI. After this, the tax continued to rise ahead of prices each year by 0.4 per cent.

Across the ledger, subsidised childcare has been introduced for the very poorest families, other help for families via tax credits, pension credit has helped remove vulnerable elderly from poverty, and a winter fuel allowance is payable to everyone over 60.

The report's authors James Browne and David Phillips acknowledge that accurately measuring the impact of these reforms is far from straightforward so they offer a couple of alternative scenarios.

If you take the tax and benefit regime which existed in 1997 and leave it untouched apart from increasing tax allowances and benefits in line with rising incomes then they calculate households have paid an extra 36.4 billion in tax each year since then.

Seven-tenths of households, ie those earning more than about 19,700, are worse off, many considerably. Only the poorest third of households gain, and their gains are minimal. In other words, a lot of extra tax has been paid to little effect.

However, a note of caution. Benefits have risen in line with national income since 1979, but tax thresholds do not normally go up so fast, so these figures may be overstating the negatives. However, tax thresholds do normally rise, whereas they haven't been. This illustrates the extent to which many taxpayers are now paying significantly higher taxes as a result of the freezing of thresholds.

However, if you measure the impact of Labour's reforms against the status quo in 1997, and do not up-rate tax thresholds or benefits, the picture looks quite different, with households paying only an additional 7bn in tax. Far more families gain, all with incomes below 26,000. The poorest benefit most, and are 10 per cent better off while the very richest lose most and are 10 per cent worse off.

But these figures almost certainly overstate the benefits of Labour's reforms.

Nevertheless, Browne and Phillips conclude that incentives not to work have increased under Labour, with some groups facing a 70 per cent tax penalty, because if they increase their earnings they lose tax credits. Couples with children who both work are particularly penalised.

While there is now an incentive for lone parents to get back into work, the IFS points out that childcare subsidies have helped very few as the conditions are so onerous.

Lower-paid adults without children have suffered under Labour. The authors divide income groups into ten and conclude: "Many people in the bottom decile in 1997 are now in the second, third or fourth decile. Likewise some originally in deciles two to four, particularly among unfavoured groups such as working-age adults, without children, are now in the bottom group."