New evidence that Osborne’s Budget hits the poorest hardest

IFS study proves conclusively that June emergency Budget was regressive, not progressive.

"Overall, everyone will pay something, but the people at the bottom of the income scale will pay proportionally less than the people at the top.

"It is a progressive Budget."

George Osborne, 22 June 2010

"[T]he tax and benefit changes announced in the emergency Budget are clearly regressive as, on average, they hit the poorest households more than those in the upper-middle of the income distribution."

Institute for Fiscal Studies, 25 August 2010

There's yet more evidence that George Osborne's emergency Budget was regressive, not progressive, courtesy of that oracle of economics, the Institute for Fiscal Studies, this morning.

The IFS first concluded that Osborne's Budget was "generally regressive" the day after his speech to the House, but that analysis excluded some benefit changes due to be in place by 2014-2015.

The new research, which looks at the effect of all tax and benefit reforms due to be introduced between now and April 2014, should end all attempts by the coalition to celebrate the Budget as "progressive".

As the graph below shows, the poorest families lose the most from the Budget, while the richest families lose least.

Budget

So, what is the political fallout from all of this? It's going to be an uncomfortable day for Nick Clegg (who claimed that fairness had been "hard-wired" into the Budget), with one Lib Dem MP, Mike Hancock, already on the warpath. He said: "We didn't sign up for a coalition that was going to hurt the poorest people in society, and I certainly didn't get elected to do that ever."

It'll also be worth watching to see how the increasingly combative Simon Hughes responds, having been assured by Clegg that the Budget was progressive.

As I've argued before, Osborne and the rest of the coalition now have a clear choice. They can either abandon the most punitive aspects of their deficit reduction programme, or they can, in true Thatcherite style, mount a defence of regressive economics.

But, after today's findings, it's clearer than ever that dressing up regressive cuts as "progressive" is intellectually and morally unsustainable.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

We still have time to change our minds on Brexit

The British people will soon find they have been misled. 

On the radio on 29 March 2017, another "independence day" for rejoicing Brexiteers, former SNP leader Alex Salmond and former Ukip leader Nigel Farage battled hard over the ramifications of Brexit. Here are two people who could be responsible for the break-up of the United Kingdom. Farage said it was a day we were getting our country back.

Yet let alone getting our country back, we could be losing our country. And what is so frustrating is that not only have we always had our country by being part of the European Union, but we have had the best of both worlds.

It is Philip Hammond who said: “We cannot cherry pick, we cannot have our cake and eat it too”. The irony is that we have had our cake and eaten it, too.

We are not in Schengen, we are not in the euro and we make the laws that affect our daily lives in Westminster – not in Europe – be it our taxes, be it our planning laws, be it business rates, be it tax credits, be it benefits or welfare, be it healthcare. We measure our roads in miles because we choose to and we pour our beer in pints because we choose to. We have not been part of any move towards further integration and an EU super-state, let alone the EU army.

Since the formation of the EU, Britain has had the highest cumulative GDP growth of any country in the EU – 62 per cent, compared with Germany at 35 per cent. We have done well out of being part of the EU. What we have embarked on in the form of Brexit is utter folly.

The triggering of Article 50 now is a self-imposed deadline by the Prime Minister for purely political reasons. She wants to fix the two-year process to end by March 2019 well in time to go into the election in 2020, with the negotiations completed.

There is nothing more or less to this timing. People need to wake up to this. Why else would she trigger Article 50 before the French and German elections, when we know Europe’s attention will be elsewhere?

We are going to waste six months of those two years, all because Prime Minister Theresa May hopes the negotiations are complete before her term comes to an end. I can guarantee that the British people will soon become aware of this plot. The Emperor has no clothes.

Reading through the letter that has been delivered to the EU and listening to the Prime Minister’s statement in Parliament today amounted to reading and listening to pure platitudes and, quite frankly, hot air. It recalls the meaningless phrase, "Brexit means Brexit".

What the letter and the statement very clearly outlined is how complex the negotiations are going to be over the next two years. In fact, they admit that it is unlikely that they are going to be able to conclude negotiations within the two-year period set aside.

That is not the only way in which the British people have been misled. The Conservative party manifesto clearly stated that staying in the single market was a priority. Now the Prime Minister has very clearly stated in her Lancaster House speech, and in Parliament on 29 March that we are not going to be staying in the single market.

Had the British people been told this by the Leave campaign, I can guarantee many people would not have voted to leave.

Had British businesses been consulted, British businesses unanimously – small, medium and large – would have said they appreciate and benefit from the single market, the free movement of goods and services, the movement of people, the three million people from the EU that work in the UK, who we need. We have an unemployment rate of under 5 per cent – what would we do without these 3m people?

Furthermore, this country is one of the leaders in the world in financial services, which benefits from being able to operate freely in the European Union and our businesses benefit from that as a result. We benefit from exporting, tariff-free, to every EU country. That is now in jeopardy as well.

The Prime Minister’s letter to the EU talks with bravado about our demands for a fair negotiation, when we in Britain are in the very weakest position to negotiate. We are just one country up against 27 countries, the European Commission and the European Council and the European Parliament. India, the US and the rest of the world do not want us to leave the European Union.

The Prime Minister’s letter of notice already talks of transitional deals beyond the two years. No country, no business and no economy likes uncertainty for such a prolonged period. This letter not just prolongs but accentuates the uncertainty that the UK is going to face in the coming years.

Britain is one of the three largest recipients of inward investment in the world and our economy depends on inward investment. Since the referendum, the pound has fallen 20 per cent. That is a clear signal from the world, saying, "We do not like this uncertainty and we do not like Brexit."

Though the Prime Minister said there is it no turning back, if we come to our senses we will not leave the EU. Article 50 is revocable. At any time from today we can decide we want to stay on.

That is for the benefit of the British economy, for keeping the United Kingdom "United", and for Europe as a whole – let alone the global economy.

Lord Bilimoria is the founder and chairman of Cobra Beer, Chancellor of the University of Birmingham and the founding Chairman of the UK-India Business Council.