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?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
peopleMathematician John Nash inspired the film Beautiful Mind
News
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Life and Style
Audrey Hepburn with Hubert De Givenchy, whose well-cut black tuxedo is a 'timeless look'
fashionIt may be a paradox, but the industry loves it
Arts and Entertainment
The pair in their heyday in 1967
music
Life and Style
fashionFrom bathing dresses in the twenties to modern bikinis
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine