IFS: tax and welfare measures are “regressive”

Osborne caught out on claim that combined tax and benefit changes are “progressive”.

The oracle has spoken. At its media briefing this afternoon, the Institute for Fiscal Studies concluded that the tax and benefit measures announced in the Spending Review are "clearly regressive".

It flatly rejected the Treasury's argument that its combined tax and welfare measures up to 2012/13 are "progressive", a claim that was made possible only by the fact that the government's analysis ignores a third of the changes due to take place. These include some of the most regressive measures, such as the cap on housing benefit, the cuts to council tax benefit and the disability living allowance, and the time-limiting of the employment and support allowance.

The Treasury's justification was the lack of data available to "attribute changes in tax, tax credits or benefits to individuals". But the IFS number-crunchers believe that a "rough estimate" of the likely distributional impact can be made. The graph below is the result.

Graph

As the IFS notes, the white line (measuring the impact of tax and benefit changes as a proportion of income) shows that the changes were "slightly regressive or flat within the bottom nine-tenths of households".

The IFS has also produced another graph (see below), estimating the distributional effect of changes up to 2014/15, which shows the regressive impact even more clearly. As a percentage of net income, the poorest 10 per cent lose more than every other group, including the richest 10 per cent.

Graph

In many ways it's admirable that the coaliton, unlike previous Conservative administrations, is willing to engage in the progressive/regressive debate. But it can't choose to fight on this terrain and then cry foul when it's caught out.

Some on the right are starting to wonder whether a straight-out Thatcherite defence of regressive economics would serve the government better.

George Eaton is political editor of the New Statesman.

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Stop pretending an independent Scotland couldn't join the EU

The SNP has a different set of questions to answer. 

"But Spain", is the common response to a discussion of whether, by voting for independence, Scotland could effectively reverse Brexit. "Disaster for Sturgeon as Spain BACKS May over plans to block Scottish independence vote," declared the Brexiteer's favourite, The Express, this month. Spain, according to this narrative, would unilaterally puncture the SNP's bubble by vetoing readmission to the EU. An independent Scotland would be cast adrift into the North Sea.

I just don't buy it. I have put this question to everyone from former EU member state ambassadors to the former World Trade Organisation head and the answer has been the same: "It can be managed." 

There is also a crucial difference between Spain vetoing Scotland entering the EU, and considering its application on its own merit. Spain is indeed nervous about encouraging Catalonian separatists. But read between the lines. Spain's position on Scotland has so far been to say it would have to exit the EU, become independent and reapply. 

Last time I checked, that's not a veto. And from an EU perspective, this isn't as arduous as it might sound. Scotland's regulations would be in line with EU regulations. It would not upset the balance of power, nor fuel an identity crisis, in the way that Turkey's application did. Spain could justify acquiesence on the basis that the circumstances were extraordinary. And for a club struggling to hold together, an eager defector from the renegade Brexit Britain would be a PR coup. 

Where it is far more arduous is for the Scottish National Party, and the independence movement. As I've written before, roughly a third of SNP voters also voted Leave. Apart from the second-glass-of-wine question of whether quitting one union to join another really counts as independence, Scotland's fishing industry has concrete concerns about the EU. SNP MP Joanna Cherry has observed that it is "no secret" that many Leave voters worked in fishing. 

Then there are the questions all but the most diehard Remain voters will want answered. Would Scotland take the Euro? Would a land border with England be an acceptable sacrifice? Would an independent Scotland in the EU push for reforms at Brussels, or slavishly follow bureacracy's lead? The terms of EU membership for an independent Scotland may look quite different from those enjoyed by the UK.

Rather than continuing to shoot down the idea that an independent Scotland could join the EU - a club happy to accept other small countries like Ireland, Austria and Malta - opponents of the Scottish independence movement should be instead asking these questions. They are far harder to answer. 

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