Finally – definitive evidence that Osborne’s budget is regressive


8:45 am - August 25th 2010

by Nicola Smith    


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Today, End Child Poverty reports on new research, commissioned from the IFS, that shows definitively what many others have highlighted – the cuts announced in the Budget will hit families and the poorest the hardest.

As we showed immediately after the Budget, the Chancellor’s claim that the spending changes he announced were ‘progressive’ has always been contentious – significantly the Treasury’s modelling did not include a third of social security changes, including cuts to Housing Benefit and Disability Living Allowance, and only changes up until 2012/13 were considered.

This IFS research puts the Budget’s regressive impact beyond doubt: the poorest will be hit more than many of the richest in cash terms let alone as a percentage; poor and middle income families with children lose out more than any other household types and the very poorest families with children lose more than any other groups – with 5 per cent of their total income being cut.


(graph from IFS release)

The graph shows the effect of the tax and benefit reforms announced in the June Budget (to be introduced by April 2014) by income decile and household type. It makes the Budget’s impacts absolutely clear: the poorest families lose the most and the wealthiest the least.

And this is before the significant impact of cuts in public services has been considered.

Research undertaken for the TUC by Landman Economics and the Fabian Society has shown that the cuts the Coalition are proposing will lead to an average annual cut in public spending on the poorest tenth of households of £1,344, equivalent to 20.5 per cent of their household income, whereas the average annual cut in public spending on the richest tenth of households will be £1,135, equivalent to just 1.6 per cent of their household income.

Spending cuts on the scale that the Coalition is proposing simply cannot be achieved without the poorest being hardest hit – it’s time for the Government to stop pretending that the steepest cuts since WW2 are compatible with fairness.

ITN report on IFS release today


Nicola Smith is the TUC Senior Policy Officer working on a range of labour market and social welfare policy.

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About the author
Nicola is the TUC's Senior Policy Officer working on a range of labour market and social welfare policy. She blogs mostly at ToUChstone.
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The omission of cuts in public services is an important one, which hides further regressiveness.

Benefits in kind – the impact of public services on effective income – are worth £6,315 for the poorest income quintile (47% of final income) and £3,870 for the richest quintile (7% of final income).

A 1/3 cut in services – if a flat cut across all services – would reduce final income of the poorest quintile by £2,105 (16%) and that of the richest quintile by £1,290 (2.4%).

“Sharing the pain” in a “progressive budget”.

All data from Table 1 of official statistics on the impact of tax and benefits on income http://www.statistics.gov.uk/downloads/theme_social/Taxes-Benefits/All_fig_&_tabs_0809.xls

3. George W. Potter
5. George W. Potter

@4 And? Just because Osbourne praised the IFS in the past doesn’t change that it isolated the June budget when the IFS should be looking at the changes taken as a whole. another point is that the jobs market is expected to strengthen with more people going into work whilst the IFS report assumes everyone’s circumstances remain the same.

If you actually read the link I’d posted you would see that. I had the courtesy to read yours after all. And here’s another one you might like to read, showing that Labour are no different from Osbourne when it comes to the IFS:

http://www.guardian.co.uk/politics/2010/apr/28/labour-dismisses-thinktank-criticism

That LibDemVoice “defence” in response to the IFS report is hilariously feeble. My favourite bit:

“that poorest 10% of the population will include people in genuine need, but it will also include some ex public school students studying at Oxbridge”

Hysterical.

7. George W. Potter

I’m terribly sorry, it turns out the report was far more balanced than I thought. The bias comes in the graph that was highlighted by End Child Poverty and by this article. The graph which you should be looking at is this one:

http://4.bp.blogspot.com/_uys_AI0aHfQ/THTtXD0BslI/AAAAAAAAAMg/7-oJY02mdpo/s400/graph_ifs_whatwillhappen.gif

You can find more detail one the whole thing here:

http://splithorizons.blogspot.com/2010/08/ifs-study-shows-what-wont-happen.html

8. alienfromzog

Mr favourite bit of the Government’s defence was the statement that “didn’t take into account the growth-creating potential of the budget”

Who said Tories couldn’t do irony?

AFZ

@georgewpotter

The claim the Government made was that the new measures contained in the LibCon emergency budget in June 2010 were progressive.

I don’t understand why assessing the impact of previous Labour measures is relevant to the impact of the June 2010 budget.

10. George W. Potter

@Sevillista Well, for example, some measures introduced by Labour didn’t come into effect until after the election – any sane government has to take into account what’s already happening and then base their decisions around it. Trying to say previous measures aren’t relevant is like saying levels of taxation under the previous government aren’t relevant when the new government considers whether to decrease or increase tax rates. They’re inextricably linked.

Osborne is only getting away with claiming that it is a progressive budget because he is using the Lie Dems as human shields.

Clegg is either the biggest fool in politics or a liar of such magnitude that he makes Blair look like an honest man. Not only is the budget regressive it is in danger of driving us back into recession.

@George

“another point is that the jobs market is expected to strengthen with more people going into work whilst the IFS report assumes everyone’s circumstances remain the same.”

The government is predicting that there will be a bigger growth in private sector jobs over the next few years than at the height of the New Labour boom. The people who would be doing this hiring seem to disagree with this fantasy:

http://www.managementtoday.co.uk/channel/HumanCapital/news/1021158/employers-cast-doubt-government-recovery-prediction/

People are bickering over whether the IFS report is biased. Why don’t you read it just yourselves instead of arguing about it on here?

http://www.ifs.org.uk/bns/bn108.pdf

The report was commissioned by End Child Poverty, and I do find it disappointing that the IFS chose to publish that particular graph in their press release as it is misleading (which is unsurprising given who their client was, and I’m only saying that because I’m the first to dismiss any research by Policy Exchange). It was totally unecessary to be misleading as well, as – despite occasional praise for the Coalition Budget – the IFS is pretty unequivocal in its conclusion that this budget is not progressive; whatever that stupid neologism is supposed to mean.

No doubt our lazy press will just mindlessly regurgitate that graph now, and the government will use it as evidence that the report cannot be trusted.

I’m not sure I agree with the sigh of relief the OP seems to be exhaling at the discovery of ‘definitive evidence.’ In fact, the IFS has been publishing research / analysis to this effect since March (http://www.ifs.org.uk/publications/browse?subject=2). By suggesting that we only now have definitve evidence of this budget’s unfairness, you’re letting the Chancellor off the hook. The fact is, there have been choruses of experts warning the government for months about inequality and double-dips, and they’ve ploughed ahead regardless.

The ‘finally, we have some evidence!’ reaction says less about how much was previously known about the Budget and more about the behaviour of the press. The pessimistic analysis following the pre-Budget Report was actually fairly profuse. But it was largely ignored by the mainstream media as it didn’t fit into the narrative of the time which, as I recall, was drum beating for the head of Gordon Brown – led predictably by members of the Murdocracy. That one of Murdoch’s recent acquisitions is now chief hand-wringer is just another dazzling display of mercenary hypocrisy.

As far as Labour is concerned, I don’t see how bringing up their plans makes any difference. If I was Chancellor, I might kill the poor and feed them to the rich, but that’s totally irrelevant because it has no effect o what happens over the next five years. On the other hand, the Tory-bashers who hold Labour up as a shining beacon of fairness might do well to remember that voting in the opposition because you hate the incumbent is exactly what got us into this mess in the first place. As Ian Hislop sagely puts it, ‘if you want change, you have to think about change from what and to what.’ And lest we forget, all Labour’s good work in the public sector has been nullified by the financial crisis – a result of them climbing up the arse of city executive and setting up residence there for twelve years.

How is this report going down on Liberal Voice?

Oh dear, not so good. Just a small sample of those happy campers in the Liberal Dems these days…….

“maybe best to let the Tories defend their budget instead of pretending that it is ours. Collective responsibility does not extend beyond ministers to entire parties.”

“there’s no pretending this isn’t a largely Tory budget, but there *are* progressive measures in there – which very well may not be in there otherwise.”

“That was almost as pitiful a defence as mounted by the minister on Today this morning.”

“How is it that our party analysed the Tory budget before the election and realised that wholesale public sector job cuts would harm recovery, then after the election, suddenly that’s no longer true? “

“Are you suggesting that no matter what the Tories propose, Liberal Democrat MPs should support it? What happens if David Cameron was Joseph Stalin and wanted to send everyone to the Gulag?”

Happy days, and we have not got on to the NHS yet.

Oh dear, I think ‘trickle-down’ is back, it was reported on radio two that a government spokesperson (I didn’t catch their name) stated that it was mis-leading to quote only the reduction in benefits as the cut in corporation tax would also stimulate an increase in jobs.


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  2. joe rose

    RT @libcon: Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  3. Laura

    RT @libcon: Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  4. Finola Kerrigan

    RT @libcon: Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  5. Alex Holland

    Osborne: "We're all in this together" – just according to the IFS some are more in it than others http://bit.ly/aEVyhI #poorhithardest

  6. kevinrye

    RT @libcon: Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  7. the-sauce.org

    RT @libcon: Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  8. Lanie Ingram

    RT @libcon: Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  9. -

    RT @libcon Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  10. Kim

    RT @libcon: Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  11. Adrian Smith

    RT @libcon: Finally – definitive evidence that Osborne's budget is regressive http://bit.ly/a5r4jP

  12. Matt Lodder

    " Finally – definitive evidence that Osborne’s budget is regressive: contribution by Nicola Smith
    Today, End Chil… http://bit.ly/bkbNKU "

  13. Nicholas Stewart

    Finally – definitive evidence that Osborne’s budget is regressive http://j.mp/aXO7qG

  14. Clearly, the IFS report means that Labour’s budget would’ve been progressive « Decline of the Logos

    […] 25, 2010 The left has gone a little bit mad over the IFS briefing note that claims Osborne’s June was regressive, rather than progressive […]

  15. Would any cuts be “progressive”? | Westminster Blog | FT.com

    […] do agree with Nicolas Smith of the TUC when she says that “it’s time for the Government to stop pretending that the steepest cuts since WW2 are compatible with fairness”. That always seemed a tenuous […]

  16. Claudio Carvalho

    Finally – definitive evidence that Osborne’s budget is regressive | Liberal Conspiracy http://t.co/WUAt3Z5 via @libcon

  17. Diogo Moreira

    RT @CCarvalho: Finally – definitive evidence that Osborne’s budget is regressive | Liberal Conspiracy http://t.co/WUAt3Z5 via @libcon

  18. George Roberts

    I know we have read it, seen it & heard it but it bears repeating often http://bit.ly/dufPLB ConDem budget dumps hardest on poorest children

  19. Value added blogging: Labour’s lost voters « Left Outside

    […] much introspection can be a bad thing, especially with a Government in power intent on radical (and largely regressive) change. Labour must work out why people left and what to do about it by the next election if they […]

  20. Where did Labour’s lost voters come from? | Liberal Conspiracy

    […] much introspection can be a bad thing, especially with a Government in power intent on radical (and largely regressive) change. Labour must work out why people left and what to do about it by the next election if they […]

  21. blogs of the world

    As we showed immediately after the Budget, the Chancellor's claim that the spending change… http://reduce.li/xtqv4p #budget





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