The Institute for Fiscal Studies (IFS), the leading independent economic think tank, has confirmed what many of us have known for months – that the government’s financial policies will hit the poorest in society the hardest.
Detailed analysis carried out by the IFS concludes that measures announced in June’s Budget are “regressive” and that low income families with children are set to lose the most as a percentage of their net income.
Back on 22 June, George Osborne, the Chancellor of the Exchequer, outlined the coalition government’s financial plans in an emergency budget. It was widely predicted to be a tough one, but with £11 billion of welfare reductions and a rise in VAT it was clear that it would hit many people even harder than expected.
And the IFS has now concluded that the government’s plans, “hit the poorest households more than those in the upper middle of the income distribution in cash, let alone percentage, terms.”
The details are simple: the VAT rise, combined with benefit cuts and massive public spending reductions leave the top earners largely unaffected, while those who can least afford it find themselves bearing the brunt of the government’s cuts.
The IFS concluded that the poorest 10% of families will lose over 5% of their income as a result of the budget measures. Non-pensioner households without children in the richest 10% of households will lose less than 1%.
It also stated that Labour’s plans for 2010-14 would have meant that the richest 10% of households would take the brunt of the less extensive cuts it had proposed.
The report also questions the government’s decision to change its calculations for some benefits by using the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI). The biggest difference is the removal of housing costs and Council Tax, a large percentage of many people’s budget, from the equation.
The Treasury has said it does not accept the report’s conclusions, calling the analysis “selective”. But they would say that, wouldn’t they?
Opposition politicians meanwhile have lined up to condemn the government in light of this new analysis. Amid the predictable cries of “told you so” there is genuine anger that the government has hit low income families hardest.
Yvette Cooper, the Shadow Work and Pensions Secretary, called the budget, “a shocking and unfair attack on children and families”. The SNP’s Stewart Hosie said, “the coalition have created a perfect storm for the poorest households.”
And Fiona Weir, spokeswoman for the End Child Poverty campaign stated that, “It’s not fair that children should have to pay for the cuts and shocking that the poorest families are bearing the brunt.”
There had to be spending cuts in light of the massive deficit in the public purse. But the big political questions were whether immediate cuts were required and where should they be made.
The Tories, supported by their new friends from the Lib Dems, decided that the poorest families should be the ones to be hit the hardest, giving lie to their claims to be the party of the family.
The government has argued that its budget was progressive. This new analysis by a respected, and independent, body contradicts that assertion.
Who do you believe?