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25 August 2010

Coalition’s Budget is “regressive”, says IFS

Leading economic think tank shows that Budget cuts will hit poorest families hardest.

By New Statesman

The coalition government’s emergency Budget will hit poorest families hardest, according to a leading independent economic think tank.

The Institute for Fiscal Studies (IFS) said that George Osborne’s measures were “regressive”, despite his repeated claims that it is a “progressive” Budget.

It analysis shows that welfare cuts meant working families on the lowest incomes – particularly those with children – would lose the most as a percentage of net income.

The report concludes: “Once all of the benefit cuts are considered, the 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 in cash, let alone percentage, terms.”

The IFS said the poorest 10 per cent of families would lose over 5 per cent of their income as a result of the Budget, while non-pensioner households without children in the richest 10 per cent of households would lose less than 1 per cent.

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This was a marked contrast, the report shows, to the “progressive” plans that the government inherited from Labour, under which the richest 10 per cent would bear the brunt of cuts.

The Treasury refused to accept this analysis, saying: “It is selective, ignoring the pro-growth and employment effects of budget measures such as helping households move from benefits into work, and reductions in corporation tax.”

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