Spending Review “regressive” – IFS
The independent Institute for Fiscal Studies held their briefing on the Spending Review yesterday. The opening remarks from IFS Acting Director Carl Emmerson make interesting reading.
In one paragraph he explodes the Chancellor’s claim that his plans cut Departmental spending by less than the last government was planning. Mr Osborne has already announced £6 billion of his cuts, so of course his cuts are lower. The essential truth is that
by 2014–15 departmental spending is forecast to be below the level implied by the plans set out in Labour’s last Budget. And because this is true, any like-for-like comparison of spending in “unprotected areas” would also be higher in 2014–15 under the last Government’s plans than under the new Government’s plans.
I was also interested in his remarks on whether the Spending Review’s welfare changes were regressive. His answer is that the measures introduced by this government are regressive, but if you include the measures introduced in Alastair Darling’s last budget that the coalition has chosen not to reverse, then the top 2 percent do lose out more than everyone else – but even then the impact over the rest of the country is regressive:
Our analysis – published in August – shows that by including a wider set of benefit reforms announced by this government leads to the conclusion that the impact of all tax and benefit measures yet to come in reduces the incomes of lower income households by more than that of higher income households, with the notable exception of the richest 2% of the population who are the hardest hit. Therefore the tax and benefit changes are regressive rather than progressive across most of the income distribution. And when we add in the new measures announced yesterday this finding is, unsurprisingly, reinforced. So our analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way.