The coalition’s changes have cost the average family more than £1,000 a year. Photo: Getty
Show Hide image

IFS report dispels Osborne’s myth that we’re “all in it together”

Middle to higher income households, according to a report from the Institute for Fiscal Studies, have actually escaped “remarkably unscathed” from the coalition’s austerity drive.

Low-income families with children have bore the brunt of the coalition’s austerity drive, according to a report this morning by an independent economic think-tank.

The report, by the Institute for Fiscal Studies (IFS), suggests that the coalition’s tax and benefit changes have cost the average family more than £1,000 a year. It also adds that the richest tenth have lost out significantly in cash terms, though not as a percentage of income.

Interestingly, it can be taken from the report that Osborne’s mantra of we’re “all in it together” is little more than a myth: middle to higher income households have actually escaped “remarkably unscathed” from the coalition’s austerity measures, according to the IFS. And those in the same wage bracket, without children, have been left better off as a result of the coalition’s tax and benefit changes. But for middle and higher income families with children, the loss of tax credits and child benefit “has more than offset the effect of income tax cuts”.

Pensioners were relatively unaffected, on average, as the hike in VAT largely offset their gains from the “triple lock” on the state pension.

Cathy Jamieson, Labour’s shadow treasury minister, said today that the report shows that tax and benefit changes under the coalition have left households £1,127 a year worse off on average. Jamieson said: “Families with children have been hit hardest of all by David Cameron’s choices – a clear betrayal of his promise to lead the most family-friendly government ever.

“For all the government’s claims, this report shows that they have raised tax by over £13.5bn a year. And for millions of working people the rise in VAT and cuts to things like tax credits have more than offset changes to the personal allowance.

“It is clear working people can’t afford five more years of this government.”

Responding to the IFS briefing note a spokesperson for HM Treasury said:

[The report] confirms that the richest have lost the most from the Government’s changes to taxes and welfare. Treasury analysis has shown that throughout the parliament that the richest 10 per cent of households have made the largest contribution to reducing the deficit. The Treasury presents the most complete, rigorous and detailed record of the impact of this government's policies on households. At Autumn Statement this confirmed that the richest 20 per cent of households will contribute more to reducing the deficit than the remaining 80 per cent put together.”

But no mention from the Treasury of those low-income families mentioned in the IFS report. While the government claims the richest have made “the largest contribution” in reducing the deficit, the poorest have actually lost the greatest percentage of their income. The coalition’s sustained attack on the most vulnerable people in society through its relentless austerity drive has left the poorest families on the verge of destitution - but, according to the Treasury, the “richest have lost the most”. 

James Browne, a senior research economist at IFS and co-author of the report said: “Whichever way you cut it, low-income households with children and the very richest households have lost out significantly from the changes as a percentage of their incomes.”

“Increases in the tax-free personal allowance have played an important role in protecting middle-income, working-age households meaning that those without children have actually gained overall.”

Ashley Cowburn writes about politics and is the winner of the Anthony Howard Award 2014. He tweets @ashcowburn

 

 

Photo: Getty
Show Hide image

Brexiteers want national sovereignty and tighter borders – but they can't have both

The role of the European Court of Justice is a major sticking point in talks.

Why doesn't Theresa May's counter-offer on the rights of European citizens living and working in Britain pass muster among the EU27? It all comes down to one of the biggest sticking points in the Brexit talks: the role of the European Court of Justice.

The European Commission, under direction from the leaders of member states, wants the rights of the three million living here and of the British diaspora in the EU guaranteed by the European Court. Why? Because that way, the status of EU citizens here or that of British nationals in the EU aren't subject to the whims of a simple majority vote in the legislature.

This is where Liam Fox, as crassly he might have put it, has a point about the difference between the UK and the EU27, being that the UK does not "need to bury" its 20th century history. We're one of the few countries in the EU where political elites get away with saying, "Well, what's the worst that could happen?" when it comes to checks on legislative power. For the leaders of member states, a guarantee not backed up by the European Court of Justice is no guarantee at all.

That comes down to the biggest sticking point of the Brexit talks: rules. In terms of the deal that most British voters, Leave or Remain, want – a non-disruptive exit that allows the British government to set immigration policy – UK politicians can get that, provided they concede on money and rules, ie we continue to follow the directions of the European Court while having no power to set them. Britain could even seek its own trade deals and have that arrangement.

But the problem is that deal runs up against the motivations of the Brexit elite, who are in the main unfussed about migration but are concerned about sovereignty – and remaining subject to the rule of the ECJ without being able to set its parameters is, it goes without saying, a significant loss of sovereignty. 

Can a fudge be found? That the Article 50 process goes so heavily in favour of the EU27 and against the leaving member means that the appetite on the EuCo side for a fudge is limited. 

But there is hope, as David Davis has conceded that there will have to be an international guarantor, as of course there will have to be. If you trade across borders, you need a cross-border referee. If a plane goes up in one country and lands in another, then it is, by necessity, regulated across borders. (That arrangement has also been mooted by Sigmar Gabriel, foreign minister in Angela Merkel's government. But that Gabriel's centre-left party looks likely to be expelled from coalition after the next election means that his support isn't as valuable as many Brexiteers seem to think.)

On the Conservative side, a new EU-UK international body would satisfy the words of May's ECJ red line. On the EU27 side, that the body would, inevitably, take its lead from the treaties of the EU sans Britain and the ECJ would mean that in spirit, Britain would be subject to the ECJ by another name.

But it comes back to the Brexit dilemma. You can satisfy the voters' demand for non-disruptive control of British borders. You can satisfy political demand for sovereignty. But you can't have both. May – and whoever replaces her – will face the same question: who do you disappoint?

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

0800 7318496