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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The public like radical policies, but they aren't so keen on radical politicians

Around the world, support for genuinely revolutionary ideas is strong, but in the UK at least, there's less enthusiasm for the people promising them.

You’re probably a getting a little bored of the litany of talking head statistics: trust in elected officials, parliament, the justice system and even democracy itself has been falling steadily for years and is at record lows. Maybe you’ve seen that graph that shows how people born after 1980 are significantly less likely than those born in 1960 to think that living in a democracy is ‘essential’. You’ve possibly heard of the ‘Pasokification’ of the centre-left, so-named the collapse of the once dominant Greek social democratic party Pasok, a technique being aggressively pursued by other centre-left parties in Europe to great effect.    

And so, goes the logic, there is a great appetite for something different, something new. It’s true! The space into which Trump et al barged leaves plenty of room for others: Beppe Grillo in Italy, Spanish Podemos, Bernie Sanders, Jean Luc Melanchon, and many more to come.

In my new book Radicals I followed movements and ideas that in many cases make someone like Jeremy Corbyn seem positively pedestrian: people who want to dismantle the nation state entirely, use technology to live forever, go off grid. All these ideas are finding fertile ground with the frustrated, disillusioned, and idealistic. The challenges of coming down the line – forces of climate change, technological change, fiscal crunch, mass movements of people – will demand new types of political ideas. Radical, outsider thinking is back, and this does, in theory at least, offer a chink of light for Corbyn’s Labour.

Polling last week found pretty surprising levels of support for many of his ideas. A big tax on high earners, nationalising the railways, banning zero hours contracts and upping the minimum wage are all popular. Support for renewable energy is at an all-time high. According to a recent YouGov poll, Brits actually prefer socialism to capitalism, a sentiment most strongly held among younger people.

There are others ideas too, which Corbyn is probably less likely to go for. Stopping benefits entirely for people who refuse to accept an offer of employment is hugely popular, and in one recent poll over half of respondents would be happy with a total ban on all immigration for the next two years. Around half the public now consistently want marijuana legalised, a number that will surely swell as US states with licenced pot vendors start showing off their dazzling tax returns.

The BNP effect used to refer to the problem the far-right had with selling their ideas. Some of their policies were extremely popular with the public, until associated with the BNP. It seems as though the same problem is now afflicting the Labour brand. It’s not the radical ideas – there is now a genuine appetite for those who think differently – that’s the problem, it’s the person who’s tasked with delivering them, and not enough people think Corbyn can or should. The ideal politician for the UK today is quite possibly someone who is bold enough to have genuinely radical proposals and ideas, and yet appears extremely moderate, sensible and centrist in character and temperament. Perhaps some blend of Blair and Corbyn. Sounds like an oxymoron doesn’t it? But this is politics, 2017. Anything is possible.

Jamie Bartlett is the head of the Violence and Extremism Programme and the Centre for the Analysis of Social Media at Demos.

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