Osborne’s Budget ‘will hurt the poor’
By Ian Dunt
The emergency Budget was a regressive measure which will hurt the poor, economic analysts have concluded.
The Institute of Fiscal Studies’ (IFS) research for the End Child Poverty campaign found the Budget will hit families with children hardest and that poorest families will lose the most.
The report could have a devastating effect on the coalition. It categorically refutes George Osborne’s repeated claim that his economic agenda is ‘progressive’.
It also has a heavy political impact on deputy prime minister Nick Clegg, who is relying on the ‘progressive’ tag to convince Liberal Democrats to support the coalition’s austerity drive.
The calculations arrived at by the well respected IFS are more holistic than those evaluated by the Treasury. It arrived at its conclusions by including the effects of wider benefit changes, such as restrictions on housing benefit, in its assessment of how poor families would be affected.
The poorest families with children would face a five per cent loss of income by 2014, the group said.
“It’s not fair that children should have to pay for the cuts and shocking that the poorest families are bearing the brunt of them,” Fiona Weir, a spokesperson for the End Child Poverty campaign, said.
“The coalition must re-consider its cuts, including changes to housing benefit and uprating benefits. The spending review will need to show clearly how the government will deliver on the commitment to ending child poverty, ensuring that cuts fall on those most able to pay.”
Unlike the Treasury’s own modelling, the IFS analysis takes into account the impact of all the Budget’s changes up to 2014, analyses the June 2010 Budget changes separately from those announced previously and includes changes to housing benefit and disability living allowance, its authors said.
“The measures announced in the June 2010 budget are regressive as they hit the poorest more than the seventh, eighth and ninth deciles in cash, let alone percentage, terms,” the report states.
“Families with children lose more than pensioners or other household types in all except the top three income groups.
“The poorest families with children lose more than any other group. As a result of the changes announced in the June Budget, families in the bottom income decile are set to lose over five per cent of their income, compared to less than one per cent for non-pensioner households without children in the top decile.”
The report found that those measures which hit better off families were actually introduced by the Labour government, while those introduced by Mr Osborne were generally regressive.
It also drew attention to the decision to link benefits with the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI) from April 2011, which it branded “the biggest single change to benefit policy” in the Budget.
The move is likely to lead to significantly less generous benefits in the years ahead, the authors concluded.
“Just last week George Osborne told us that his Budget was ‘fair’. But it’s decisions, not warm words, that count,” said Alistair Darling, shadow chancellor.
“Today there’s conclusive evidence that far from being fair the coalition has hit the poorest hardest, especially those with children. While Nick Clegg is in charge he would do well to ask himself what he thinks he’s doing providing cover for this old fashioned Tory Budget.”
Trade unions said the report vindicated their position towards the deficit reducation plan.
Dave Prentis, Unison general secretary, said: “There is no compassion in this coalition.
“The chancellor’s claims that his budget was fair and progressive have been blown out of the water. Well he didn’t fool us then and he’s not fooling anyone now.”
But the Treasury questioned the report’s methodology to cast doubt on its conclusions.
“The government does not accept the IFS analysis,” a Treasury spokesperson said.
“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. It is essential that policy is informed by transparent analysis: that’s why we stand full-square behind our Budget analysis which is based on what can accurately and completely be measured.”
Nick Clegg also rejected the report, saying it did not take into account what the government was going to do in future Budgets to build on tax benefits for those in low incomes introduced this year.
Pressure groups, trade unions and political parties are engaged in a frantic attempt to rally their supporters ahead of the comprehensive spending review in October.
