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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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.