Friday, October 22, 2010

Spending review cuts will hit poorest harder, says IFS.

It normally takes the Institute of Fiscal Studies longer than twenty four hours to work out whether or not a budget has been progressive or regressive, but, in the case of George Osborne's latest offering, no such time was necessary.

Osborne, backed by Nick Clegg, has made the ridiculous claim that the rich would carry the burden of this budget much more than the poor. It was a silly claim at the time when they made it, and the IFS has wasted no time in identifying what we all recognised when Osborne was making this silly claim.

Detailed analysis by the IFS undermining the government's case is expected to put intense pressure on Liberal Democrat ministers in the coalition who have stressed the need for tax rises and spending cuts to be progressive.

The chancellor, who acknowledged that his package of £81bn of cuts had involved "hard choices", insisted yesterday that they are fair and would be borne by "those who have the broadest shoulders".

But the IFS said that with the exception of the richest 2% of the population earning more than £150,000 a year, the less well off would be proportionately the hardest hit, with families with children the "biggest losers".

Carl Emmerson, the IFS acting director, said: "The tax and benefit changes are regressive rather than progressive across most of the income distribution. And when we add in the new measures announced yesterday this is, unsurprisingly, reinforced.

"Our analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way."

The IFS have also poured scorn on Osborne's claim that his cuts of 19% across all governmental departments is less than the cuts Labour would have implemented.

The IFS challenged Osborne's claim that the government's cuts to those departments whose budgets were not protected averaged 19% compared with 20% implied by Labour's plans.

It said the Osborne's figures failed to take into account the £6bn of cuts already announced by the government this year while the actual figure under Labour would have been 16%.

All in all, the lies told by both Osborne and Clegg have been exposed with almost record speed. That's not really very surprising, as the distance between what they claimed and the truth is actually gargantuan.

Clegg, for reasons I could never work out, kept making the bizarre claim that the cuts would create a "fairer" and "more democratic" Britain. How he imagines punishing the poor brings this about was always lost on me.

The IFS also criticised plans to scrap council tax benefit and replace it with a system of locally administered council grants. It said that it would create a "postcode lottery", providing an incentive to councils to award grants in a way that encouraged poor families to leave the area.

"The incentive it provides to local authorities to encourage low-income people to move elsewhere is undesirable," Emmerson said.

The IFS findings are most damning for Clegg, who continues to insist - to anyone who will listen - that this budget is "fair" and "democratic". As I said a few days ago, I have absolutely no idea what measurement Clegg is using when he makes those claims. But him saying that something is "fair" and "democratic" doesn't make it so. The IFS appear to concur that conclusion.

As the IFS were briefing reporters about their conclusions, both Nick Clegg and David Cameron were answering voters questions in Nottingham. And Clegg was sticking to his script that this budget was fair and democratic.

Fairness was "literally the question I have been asking myself every single day of this very difficult process we have been going through", the deputy prime minister said.

"I honestly would not have advocated this if I didn't feel that, notwithstanding all the difficulties, we tried to do this as fairly as possible.

"Of course I understand people are very, very fearful, and fear is a very powerful emotion and it kind of sweeps everything else aside.

"But I would ask people to have a little bit of perspective: if you look at some of the announcements we made yesterday, and add that to some of the announcements we made in the budget, I think the picture is a little bit more balanced than people are saying."

Clegg appears to think that by securing a pupil premium and protecting overseas aid - both admirable things in their own right - that he has somehow kept the budget "fair" and "democratic". But that's the problem with coalition politics, one is always left celebrating the fact that things could have been much worse than they actually are.

The rest of us simply look at the budget - as the IFS has done - as it actually is. And what we see is a regressive budget which attacks the poor, the old and the disabled. It's a disgrace. And the Liberal Democrats should shudder that they were part of the government which produced this travesty. It goes against everything which they claim to believe in. And the IFS have dismissed Clegg and Osborne's claim that it is fair and democratic with almost record speed.

It is not. And that fact should now be beyond doubt. The country's leading tax and spend think-tank have made their view on this abundantly clear.


Clegg has decided to embark on some cognitive dissonance. The facts are simply too unpleasant for him to deal with.

Nick Clegg, the deputy prime minister, has taken the highly unusual step of attacking the respected Institute for Fiscal Studies, describing its methods of measuring the fairness of the coalition's controversial spending review as "distorted and a complete nonsense".

That's a classic case of "shoot the messenger".


Clegg and Cameron attempt to win over a sceptical audience, and fail. Support for the Liberal Democrats is now at a twenty year low.

As I have said ever since he joined this Con-Dem coalition, he is leading his party to oblivion. He will never be forgiven for this.

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