Osborne’s “progressive” façade

Talk of a “fair and progressive” Budget disguises how cuts will hit the poorest hardest.

The coalition is determined to present today's Budget as "fair and progressive", with tax rises for the richest and tax cuts for the poorest. But does the rhetoric match the reality?

On tax, George Osborne will point to the plan (first mooted by the Lib Dems) to raise the personal tax allowance by £1,000 to £7,475, a move that will take 850,000 of the lowest-paid out of income tax altogether.

But this measure isn't as progressive as it initially appears. For a start, those individuals too poor to pay tax in the first place will gain nothing from the move. In 2009-2010, only 62 per cent of the adult population earned enough to pay income tax. Should the measure be combined with a rise in regressive VAT, the overall effect may be far from progressive.

But it's only once we take account of the likely spending cuts that any claim this Budget will be "progressive" falls apart. The coalition's decision to rely on spending cuts, rather than tax rises, to plug the deficit will have disastrous consequences for the poor.

With spending in non-ring-fenced departments poised to fall by up to 25 per cent, it is the poorest who will be hardest hit. As I noted yesterday, an analysis by the Financial Times showed that cuts would hit large parts of the north twice as hard as the south.

Today's FT contains a succinct explanation:

Spending cuts of such a scale could not be presented as "progressive" because public spending is concentrated in poorer areas and poorer families, suggesting that the Budget will have a sting in the tail.

Will Osborne, a better politician than he is an economist, have the chutzpah to claim that his cuts are "progressive"? If he does, Labour will be presented with an open goal.

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George Eaton is political editor of the New Statesman.

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The 5 things the Tories aren't telling you about their manifesto

Turns out the NHS is something you really have to pay for after all. 

When Theresa May launched the Conservative 2017 manifesto, she borrowed the most popular policies from across the political spectrum. Some anti-immigrant rhetoric? Some strong action on rip-off energy firms? The message is clear - you can have it all if you vote Tory.

But can you? The respected thinktank the Institute for Fiscal Studies has now been through the manifesto with a fine tooth comb, and it turns out there are some things the Tory manifesto just doesn't mention...

1. How budgeting works

They say: "a balanced budget by the middle of the next decade"

What they don't say: The Conservatives don't talk very much about new taxes or spending commitments in the manifesto. But the IFS argues that balancing the budget "would likely require more spending cuts or tax rises even beyond the end of the next parliament."

2. How this isn't the end of austerity

They say: "We will always be guided by what matters to the ordinary, working families of this nation."

What they don't say: The manifesto does not backtrack on existing planned cuts to working-age welfare benefits. According to the IFS, these cuts will "reduce the incomes of the lowest income working age households significantly – and by more than the cuts seen since 2010".

3. Why some policies don't make a difference

They say: "The Triple Lock has worked: it is now time to set pensions on an even course."

What they don't say: The argument behind scrapping the "triple lock" on pensions is that it provides an unneccessarily generous subsidy to pensioners (including superbly wealthy ones) at the expense of the taxpayer.

However, the IFS found that the Conservatives' proposed solution - a "double lock" which rises with earnings or inflation - will cost the taxpayer just as much over the coming Parliament. After all, Brexit has caused a drop in the value of sterling, which is now causing price inflation...

4. That healthcare can't be done cheap

They say: "The next Conservative government will give the NHS the resources it needs."

What they don't say: The £8bn more promised for the NHS over the next five years is a continuation of underinvestment in the NHS. The IFS says: "Conservative plans for NHS spending look very tight indeed and may well be undeliverable."

5. Cutting immigration costs us

They say: "We will therefore establish an immigration policy that allows us to reduce and control the number of people who come to Britain from the European Union, while still allowing us to attract the skilled workers our economy needs." 

What they don't say: The Office for Budget Responsibility has already calculated that lower immigration as a result of the Brexit vote could reduce tax revenues by £6bn a year in four years' time. The IFS calculates that getting net immigration down to the tens of thousands, as the Tories pledge, could double that loss.

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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