Thursday, 26 August 2010

IFS claims cause storm

A report by the respected Institute for Fiscal Studies casts doubt on the Coalition Government's claim that the Budget was progressive rather than regressive: Budget

Of course, the IFS is trying to look at a longer time period than the Government, up to 2014 rather than 2012. They attempt to allocate changes to housing benefit, Disability Living Allowance and tax credits to households.

Their conclusion is that low-income households of working age lose the most because of the cuts to welfare spending. Those who lose the least are households of working age without children in the upper half of the income distribution. This is because they do not lose out from cuts in welfare spending and are the biggest beneficiaries from the increase in the income tax personal allowance.

The biggest change to welfare policy in the 2010 budget was linking benefits with the CPI rather than the RPI. This is very likely to mean less generous benefits in the years ahead. The savings from linking to a lower index will compound over time, rising to £5.8bn in 2014-15.

Nick Clegg's initial and rather lame response was that the IFS did not take account of the efforts of the Government to get people off benefits and into work. These efforts are laudable, but previous Governments have tried to do this with mixed success.

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