Budget is not progressive, declares IFS

Liberal Democrat and Conservative claims that the Budget was "tough but fair" and "progressive" have been blown apart by the independent Institute for Fiscal Studies.

Although the IFS agrees that the richest will pay proportionately more than the poor to repair the public finances, the institute's director, Robert Chote, said that "the Budget looks less progressive – indeed somewhat regressive – when you take out the effects of measures that were inherited from the previous government, when you look further into the future than 2012, and when you include some other measures that the Treasury has chosen not to model".

Mr Chote also pointed out that the cuts to public services, which don't appear in most assessments of the "fairness" of the Budget, "are likely to hit poorer households significantly harder than richer households".

Cuts in housing benefit and in disability living allowance, again much more likely to affect the most vulnerable, are not taken into account either by the IFS or the Treasury, another reason why the official and IFS figures may underestimate how hard the coalition Government's plans will penalise the poor.

Analysis of the Budget by the IFS reveals that the poorest tenth of society will lose about 2.5 per cent of their income, despite the removal of 880,000 low-paid workers from income tax when the threshold was raised by £1,000 to £7,475. Most of that loss was engineered by George Osborne, as they would have lost hardly anything under Alistair Darling's plans.

Mr Osborne has added to the burden on the rich, but only by about 1 per cent of their average income, bringing the total loss in their income as a result of current tax and benefit measures to about 7.5 per cent. Thus the Chancellor has placed about two-and-a-half times the burden on the poorest as he has on the richest – a loss of 2.5 per cent against one of 1 per cent.

The rise in VAT to 20 per cent will be a regressive move, though the IFS concedes that, once an individual's lifetime spending is taken account of, it is a more progressive form of tax than often assumed. Cuts in benefits through altering the way they are uprated will also hit those dependent on them hard, and the freeze in child benefit and cap on housing benefit will also add to the difficulties facing families on tight budgets. A rise in unemployment will also damage the Government's "progressive" credentials.

Mr Osborne did do some things to help protect the poor, the IFS agrees. An increase in the child element of the child tax credit by £150 above indexation next year will cost £2bn, and he is of course retaining such measures as the 50p rate on income over £100,000.

Pensioners, though, including poorer ones, do better under Mr Osborne's plans than younger people. The limit on housing benefit will not apply to them, for example, and neither will there be cuts to the equivalent of the disability living allowance, the attendance allowance. Most striking is the pledge to restore the earnings link from next year, or the rise in prices or 2.5 per cent, whichever is the greater. The winter fuel allowance, concessionary TV licences and bus passes are untouched.

The reforms to housing benefit could have far-reaching effects, the IFS also claims. Breaking the link between housing benefit allowance and actual rent rises, substituting CPI for future uprating, will eventually leave many expensive areas such as London out of reach. The decision to cut housing benefit for those out of work for more than a year was also criticised by the IFS, who suggested it was an inappropriately punitive way to get people into work again.

Though the IFS did not say so in stark terms, a rise in homelessness seems an inevitable consequence of the Budget, one of the more painful and graphic ways that society will become less equal in coming years.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Business Analyst - 12 Month FTC - Entry Level

£23000 - £27000 per annum: Recruitment Genius: A Business Analyst is required ...

Recruitment Genius: Chefs - All Levels

£16000 - £23000 per annum: Recruitment Genius: To succeed, you will need to ha...

Recruitment Genius: Maintenance Engineer

£8 per hour: Recruitment Genius: This is an opportunity to join an award winni...

Recruitment Genius: Telesales Executive & Customer Service - Call Centre Jobs!

£7 - £9 per hour: Recruitment Genius: Are you outgoing? Do you want to work in...

Day In a Page

Isis in Syria: Influential tribal leaders hold secret talks with Western powers and Gulf states over possibility of mobilising against militants

Tribal gathering

Influential clans in Syria have held secret talks with Western powers and Gulf states over the possibility of mobilising against Isis. But they are determined not to be pitted against each other
Gaza, a year on from Operation Protective Edge: A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians

Gaza, a year on from Operation Protective Edge

A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians
Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously

Illnesses, car crashes and suicides

Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously
Srebrenica 20 years after the genocide: Why the survivors need closure

Bosnia's genocide, 20 years on

No-one is admitting where the bodies are buried - literally and metaphorically
How Comic-Con can make or break a movie: From Batman vs Superman to Star Wars: Episode VII

Power of the geek Gods

Each year at Comic-Con in San Diego, Hollywood bosses nervously present blockbusters to the hallowed crowd. It can make or break a movie
What do strawberries and cream have to do with tennis?

Perfect match

What do strawberries and cream have to do with tennis?
10 best trays

Get carried away with 10 best trays

Serve with ceremony on a tray chic carrier
Wimbledon 2015: Team Murray firing on all cylinders for SW19 title assault

Team Murray firing on all cylinders for title assault

Coaches Amélie Mauresmo and Jonas Bjorkman aiming to make Scot Wimbledon champion again
Wimbledon 2015: Nick Bollettieri - Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!

Nick Bollettieri's Wimbledon Files

Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!
Ashes 2015: Angus Fraser's top 10 moments from previous series'

Angus Fraser's top 10 Ashes moments

He played in five series against Australia and covered more as a newspaper correspondent. From Waugh to Warne and Hick to Headley, here are his highlights
Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high