UK budget hits the poorest hardest, says IFS

[RuleBritannia]

The coalition government's first Budget has hit the poorest families hardest, a leading economic think tank has said.

The Institute for Fiscal Studies (IFS) said the measures announced in the Budget in June were "regressive".

Its analysis suggests that low income families with children are set to lose the most - about 5% of net income - due to benefit cuts announced in the Budget.

The Treasury said it did not accept the "selective" findings of the IFS.

The IFS had already challenged the government's claim that the Budget was "progressive".

Its report was commissioned and part-funded by the End Child Poverty campaign.

The analysis suggests that cuts to areas such as housing benefit and disability allowance would hit the poorest to the tune of £422 between the Budget and April 2014.

Other income groups are forecast to lose larger amounts in cash terms, but as a percentage of take-home pay, the poorest 10% will be hardest hit, the report says.



'Regressive'

The report concluded: "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."

James Browne from the IFS also told Radio 4's Today programme: "However, when you also include the measures that were pre-announced by Alistair Darling in previous Budgets and pre-Budget reports, the overall package does seem somewhat regressive, particularly within the bottom nine-tenths of the income distribution."

The report also questioned the government's decision to use the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) when calculating certain benefits.

The Treasury said the IFS's analysis ignored the pro-growth and employment effects of Budget measures, such as helping households move from benefits into work, and reductions in corporation tax.

"We went much further than any previous government has gone in explaining how our measures would impact on people, why it's a progressive budget. We stand by that robust analysis," Financial Secretary to the Treasury Mark Hoban told the BBC.

But shadow education secretary Ed Balls said that independent analysts "tend to get things right".

"The fact is that on Budget day George Osborne and then David Cameron said this was a progressive Budget, there would not be a single child put into poverty as a result," he said.

"And what we now find out, when the detailed analysis has been done, is that the Treasury excluded certain things from that analysis. They excluded the impact of cuts in tax credits, in disability living allowance.

"And when you look at the facts, the fact is that a family with children on the lowest incomes gets hit the hardest by this Budget."

Timescales

The BBC's chief economics correspondent Hugh Pym says the disagreement between the Treasury and the IFS over their forecasts was about timescales.

When George Osborne said in the Budget the measures were progressive he was referring to changes taking effect by 2012. The IFS argues that we should look at a longer period, up to 2014, taking in a fuller range of measures including cuts to housing benefit.

On that basis the IFS stands by its analysis that the full package of measures, taking in Alistair Darling's last Budget and Mr Osborne's changes, is regressive, our correspondent says.

The report said that more than three-quarters of benefit claimants were affected by increases in housing costs, which are included in the RPI.

The report said: "Low-income households of working age lose the most as a proportion of income from the tax and benefit reforms announced in the emergency Budget.

"Those who lose the least are households of working age without children in the upper half of the income distribution.

"They do not lose out from cuts in welfare spending, and they are the biggest beneficiaries from the increase in the income tax personal allowance."

In George Osborne's June Budget, the chancellor increased VAT from 17.5% to 20% and cut welfare spending.

Child benefit and public sector pay were frozen and 25% cut from public service spending.

http://www.bbc.co.uk/news/business-11079496

[Svartalf]

It's the tories in power, what else are you fucking expecting?

[Jay G]

Don't you understand? In the mind of conservatives (USA and UK) the "little people" are helped when gov't spending is cut, and taxes are cut so the rich people can makes lots more money. Then they spend the money on things like mansions, expensive cars, yachts, etc. and the "little people" are better off becasue.......... Well i'm not sure why but Reagan and Thatcher said it's true so I guess I believe them.

[Feck]

I'm sure the trickle down effect will help all those poor people .oh sorry that might not be true if that were the case then the gap wouldn't be increasing between rich and poor would it ?

[Posse Comitatus]

STAMP THEM INTO THE GROUND

[Feck]

STAMP THEM INTO THE GROUND

Do you mean the rich the poor the government or the economists ,who have been lying for years pretending their skills have any predictive value at all ?

[Posse Comitatus]

No I mean the dirty poor.

[Feck]

No I mean the dirty poor.

Thought you might .

[Pensioner]

No I mean the dirty poor.

18 year old and you know fuck all, sometimes at your age you are better keeping your trap shut as when you open your gob you sound like a fucking idiot.

[Posse Comitatus]

David Cameron has a beautiful family.

[Posse Comitatus]

Dave only wants what's best for us.

[Clinton Huxley]

It's wise to deflate the expectations of the toiling classes now and again

[Trolldor]

It's wise to deflate the expectations of the toiling classes now and again

Just watch out for anyone with a hammer and sickle.

[Azathoth]

If you don't like it you could always do what I did and fuck off away from the whole sorry mess.

[Trolldor]

STAMP THEM INTO THE GROUND

Cut back on the drinking, eh?