George Osborne has defended scrapping an official analysis that shows how much money his budgets take from the poor and give to the richest.
The Treasury used to publish a so-called distributional analysis with its budgets and autumn statements that included a clear chart showing the impact of all changes on the incomes of all groups – from the poorest to the richest.
While the document is still published in name, the Government stopped publishing the core part of the analysis after the general election.
The scrapping coincides with independent analyses showing the Government's recent budgets have tended to redistribute away from the poor and towards higher earners.
The Chancellor was accused of having “moved the goalposts” on equality by Andrew Tyrie, the respected Conservative MP who chairs the Treasury Select Committee.
Mr Osborne argued that showing how much was being taken or given to each income group gave the impression that deficit reduction was a bad thing – and that it was therefore right for it to be scrapped.
“The problem with the distribution that we were publishing is that it assumed that … attempts to reduce borrowing were a bad thing,” he told a post-Budget hearing of the Treasury Select Committee.
“That in my view was too narrow a perspective and we therefore published, as you are well aware, a different approach that shows the proportion of public services that the IFS don’t model that go to the income quintiles and the proportion of taxes.
“What that shows is that for the poorest people they have received the same share of government services and the richest people have paid more in tax. I think that is a fair approach to fiscal consolidation.”
Mr Tyrie said the Chancellor had not produced “much evidence” to show that the new approach was better.
The Chancellor also declined to release more details about how the new model actually worked – telling Mr Tyrie that he would likely be “disappointed” if he pressed the Treasury for more information.
The original distributional analysis was begun in 2010 under the Coalition but was scrapped after the Liberal Democrats left government.
The respected Institute for Fiscal Studies think-tank now independently publishes the old-style distributional analysis in the days following the Budget.
Their analysis of the 2016 Budget found that many households in the bottom 20 per cent of earners would end up losing 12 per cent of their income by 2019, while households in the top half of the income scale would not lose anything.
Paul Johnson, the director of the IFS, said: “Raising the threshold for paying higher-rate tax is clearly helping people in the middle- and upper-income brackets, while the cuts to benefits reduce the incomes of families on lower incomes.”
George Osborne 2016 budget at a glance
George Osborne 2016 budget at a glance
1/8 Debt forecasts up, growth forecasts down
The OBR’s new forecasts have downgraded growth in all of the next five years to 2020. The watchdog says the economy will only grow by 2 per cent in 2016, as opposed to the anticipated 2.4 per cent. Borrowing and productivity growth are also down – with forecast borrowing in 2018-198 £16 billion higher
2/8 New tax on sugary drinks
The Chancellor announced a new tax on sugary soft drinks, which is projected to raise £520 million. At least some of the money will be spent on doubling funding for school sport, the Chancellor says. Labour leader Jeremy Corbyn welcomed the levy
3/8 Tax cut for higher earners paying the 40p rate
The Chancellor has raised the threshold for paying the higher rate of income tax to £45,000. The higher rate is paid by roughly the richest 15 per cent, currently people earning over £42,386
4/8 Increase in tax-free income tax threshold
The tax-free allowance increase to £11,500 in April 2017 – up from £10,600 now. The Chancellor previously raised the allowance from £6,475 in coalition with the Liberal Democrats. The Conservative manifesto pledges to put the allowance up to £12,500 by the end of the Parliament
5/8 New devolution for counties and powers for London and Manchester
The West of England, the East of England and Greater Lincolnshire will all get elected mayor-led combined authorities with new powers. The Chancellor says they are backed by £1 billion new funding. Greater Manchester will get new powers of criminal justice while London will keep its business rates – giving whoever is elected Mayor a lot more spending power
6/8 Fuel duty frozen for sixth year running
The Chancellor had planned to end the fuel duty freeze he had put in place for the whole previous parliament. In the event, he has announced a freeze for another year
7/8 All schools to become academies
As reported yesterday the Chancellor unveiled legislation to turn all schools into academies. He said all schools would either be academies or on their way to being academies by 2020, and that funding had been set aside to fund the change
8/8 Lifetime ISA
The Chancellor announced a new savings account to encourage under-40s to save for retirement – for every £4 saved, the Government will top this up by £1 up to the value of £4,000 a year. Tax-free ISAs will also be increased from £15,000 to £20,000
Work and Pensions Secretary Iain Duncan Smith resigned on Friday – and issued a warning that the Government was unfairly balancing the books on the backs of the most vulnerable in society.
Mr Duncan Smith himself was also however accused of moving the goalposts last year – when he changed the measure the Government used to monitor child poverty so that it no longer took into account actual financial poverty.
Instead, a new measure will only take into account social factors such as worklessness and education.Reuse content