The more you look at the IFS analysis, the worse it gets

Poorer families are in fact paying nearly five times more than the richest to bring down the budget deficit at a speed and value greater than anything tried before. This comes on top of evidence from the House of Commons Library that women will bear 73% of the impact of the budget as tax credits and child benefit and scaled back.

Our guest writer is Rachel Reeves, Labour Member of Parliament for Leeds West

In June I wrote a piece for the Guardian’s Comment is Free, citing the ‘shocking’ evidence from the Institute of Fiscal Studies that George Osborne’s budget will cost the poorest families four times as much as the richest families. Two months on, and after much number crunching, the IFS has revised its analysis.

Poorer families are in fact paying nearly five times more than the richest to bring down the budget deficit at a speed and value greater than anything tried before. This comes on top of evidence from the House of Commons Library that women will bear 73% of the impact of the budget as tax credits and child benefit and scaled back.

This week it was left to Nick Clegg to defend this regressive budget that will push more families, and especially children according to the analysis, back in to poverty. Clegg defended the budget on two counts.

First he said that:

“Much of the IFS analysis was about benefits, but we want to get people off benefits and into work.  That is a plan for real fairness.”

A laudable ambition which we all share.  But, hardly consistent with a budget that on the Office of Budget Responsibility’s forecast (the very quango set up by Osborne) reduces growth this year and next and adds an extra 100,000 people to the unemployment count this year and for the duration of the Parliament. The budget is regressive, and if you take in to account the impact on unemployment, even more so.

The second defence from the leader of the once-progressive Liberal Democrats is that the capital gains tax increases weren’t included.  But as the IFS point out:

“The capital gains tax measures that were excluded only came to about £800m compared to £4.1 billion in welfare measures excluded by the Treasury in their assessment.”

Even if all the capital gains impact were included it would not alter the facts. The poor lose out, while those at the top of the income distribution who have much greater capacity for absorbing some of pain and who arguably bear a little more responsibility for the recession, can carry on as usual.

The IFS analysis shows that because of the changes to benefits – particularly linking benefits to CPI and not RPI (a broader measure of prices) – substantially cutting housing benefits, freezing child benefit, and cuts to Disability Living Allowance and tax credits – the poor lose out.  This is compounded by the increase in VAT which falls harder on low income families.

Child and pensioner poverty fell substantially under Labour, but to meet the target of abolishing child poverty by 2020 a lot more is needed.  The new government point to the pupil premium and plans to offer a tax incentive to keep married couples together.  But, the stark reality of this budget is clear from the IFS numbers.  For every income bracket, families with children lose out most, and those with least money to spare are hit hardest.

For families in the bottom income decile, earning £190 a week, the budget will make them £8 a week worse off – whereas families in the top decile, earning an average of £1,600 a week the hit is £13. More than affordable at the top but plunging people in to poverty at the bottom. Expect child poverty to increase even higher.  Expect income inequality to start rising sharply – especially as most wage settlements are linked to the broader RPI rather than CPI.

From the Conservatives, we should have expected this sort of budget.  From the Liberal Democrats, it is further evidence that they abandoned their principles on entering office. For families up and down Britain it is just a prelude to what this government defines as ‘progressive’ politics.

25 Responses to “The more you look at the IFS analysis, the worse it gets”

  1. Sam Jones

    RT @leftfootfwd: The more you look at the IFS analysis, the worse it gets: //bit.ly/bpyiFL writes Leeds West MP @_RachelReeves_

  2. Shamik Das

    The more you look at the IFS analysis, the worse it gets: //bit.ly/bpyiFL writes Leeds West MP @_RachelReeves_ on @leftfootfwd

  3. Rachel Reeves

    I was shocked at the renewed IFS figures – even worse than june – what is govt definition of 'progressive'?! //bit.ly/ad03nf

  4. DrKMJ

    The more you look at the IFS analysis, the worse it gets: //bit.ly/bpyiFL writes Leeds West MP @_RachelReeves_ via @leftfootfwd

  5. Stephen

    RT @leftfootfwd: The more you look at the IFS analysis, the worse it gets: //bit.ly/bpyiFL writes Leeds West MP @_RachelReeves_

  6. SoapboxLabourUK

    RT @leftfootfwd: New post: The more you look at the IFS analysis, the worse it gets //bit.ly/bpyiFL

  7. Matt Edgar

    RT @_RachelReeves_: I was shocked at the renewed IFS figures – even worse than june – what is govt definition of 'progressive'?! //bit.ly/ad03nf

  8. Chris Horner

    RT @leftfootfwd: New post: The more you look at the IFS analysis, the worse it gets //bit.ly/bpyiFL

  9. Lee Waters

    Poorer families are paying nearly five times more than the richest to bring down the budget deficit
    //tinyurl.com/3xqte7n

  10. sallymumbycroft

    The more you look at the IFS analysis, the worse it gets | Left Foot Forward: //bit.ly/aF9jXn

  11. Anon E Mouse

    Rachel Reeves – You say; “For families in the bottom income decile, earning £190 a week, the budget will make them £8 a week worse off”

    Since these are families and so by definition have children are you including Working Families Tax Credit in your figure?

  12. Paul Eagle

    The more you look at the IFS analysis, the worse it gets – poor even worse off
    //bit.ly/ad03nf

  13. SMS PolicyWatch

    RT @leftfootfwd: New post: The more you look at the IFS analysis, the worse it gets //bit.ly/bpyiFL

  14. william

    what has happened to my comment?

  15. Chris

    @Mouse

    Oh dear, mouse, central office has let you down! Their script is out of date, Working Families Tax Credit has been renamed by Working Tax Credit for some time. Also, WTC isn’t dependant on whether you have child; its based primarily on low income and how many hours you work. I think your confusing Child Tax Credit with WTC, as the LibCons have given a pathetically small increase to those at the absolute bottom of the pile.

    In answer to the question, are the IFS including tax credit changes in their figures? Yes.

    For someone who claims to be in touch with the working classes, many of which rely on tax credits to boost their pay packets, you seem to be very out of touch – probably all the years you’ve spent in mental homes. Or your just an astroturfing LibCon, which one is it mouse?

  16. SSP Campsie

    RT @leftfootfwd: New post: The more you look at the IFS analysis, the worse it gets //bit.ly/bpyiFL

  17. diana smith

    lovely photos of David Cameron & baby. Hope he will find time to think about the IFS report //bit.ly/bpyiFL re budget & families

  18. Anon E Mouse

    Chris – By claiming “Central Office” has briefed me to ask a question is once again telling lies about me in a public forum – stop being rude.

    As much fun as this is for me, you should really be careful how your obsessive and compulsive behaviour manifests itself publically. (We both know I’m not the first to highlight this. Don’t we Chris)

    I am asking a question which isn’t dependant on my knowledge of the benefits system – it’s just a question to which I’d like an answer.

    Since I have yet to see anything that you have posted on this blog that can shown to be evidential, rather than your usually incorrect opinion, where do you get that from Chris?

    And regarding state handouts, I really wouldn’t want to be highlighting them since Gordon Brown continued Maggie Thatcher’s link of the State Pension to RPI – that gave pensioners a £.75 increase one year.

    I suppose considering Gordon Browns’s own admiration for Thatcher I shouldn’t be surprised. I was surprised when he scrapped the 10p tax rate for the poorest. No I suppose I shouldn’t have been considering his expense claims.

    Either way the coalition should be applauded for relinking the pensions and remember Chris. Labour lost the election for a reason. Oh yes.

  19. Bryony Victoria King

    RT @leftfootfwd: New post: The more you look at the IFS analysis, the worse it gets //bit.ly/bpyiFL

  20. tj greene

    RT @leftfootfwd: New post: The more you look at the IFS analysis, the worse it gets //bit.ly/bpyiFL

  21. Feneon

    While the government may point to the pupil premium as proof that its policies pursue fairness, its claim is blown right out of the water by a report conducted by the very same IFS which shows that it will have little or no effect in reducing the gap in attainment between the advantaged and disadvantaged.

    //www.ifs.org.uk/pr/pupil_premium.pdf

    @ Mouse Who didn’t win the election? The Labour Party, the Conservative Party and the Liberal Democratic Party

  22. Chris

    “As much fun as this is for me, you should really be careful how your obsessive and compulsive behaviour manifests itself publically. (We both know I’m not the first to highlight this. Don’t we Chris)”

    Hold up there mousey, stones and glass houses – this blog is littered with your rabid denunciations, so obsessive I wonder if your autistic, mental or a paid troll.

    “I am asking a question which isn’t dependant on my knowledge of the benefits system – it’s just a question to which I’d like an answer.”

    And I answered it for you, any clown could have found out the information you wanted. Your question was so pathetic I can think of no reason why you asked other than in a pathetic attempt to cast doubt on the IFS report.

    “And regarding state handouts, I really wouldn’t want to be highlighting them since Gordon Brown continued Maggie Thatcher’s link of the State Pension to RPI – that gave pensioners a £.75 increase one year.”

    There you go again! Off topic and reading straight from the central office supplied cue card, every single post you attempt to attack Labour with varying success. Your on shitty ground with this one, in terms of raising people at the bottom out of poverty Labour have a good record; under the tories child poverty was 30% ffs. And will, as researchers have warned, go up under the ConDems.

    “Either way the coalition should be applauded for relinking the pensions and remember Chris. Labour lost the election for a reason. Oh yes.”

    Labour was already committed to that, the LibCons pulled a fast one by bringing the re-linking forward by a year; thus lowering the rise in the state pension as prices inflation grow faster than wages. And don’t forget the disgraceful policy of bringing the rise in pension age forward by over a decade, people aged 58 today will suddenly and without warning have to work an extra year.

    And as Feneon said none of the parties won the election!!!

  23. Noise

    Teacher – earns £25kpa, pays roughly 52% of salary as taxes
    Unemployed family – housing benefit (up to £51kpa untaxed), council tax benefit up to £2000

    Are we promoting a system whereby a hard working teacher cannot afford to live in a house that an unemployed person can get from the state for free?

    That is the dilemma, while it is noble to champion the poor, to suggest there weren’t problems in the existing structure is naive. As the right honourable Tony Blair once quoted “a hand up, not a hand out”.

  24. embchase

    RT @leftfootfwd: The more you look at the IFS analysis, the worse it gets //bit.ly/aF9jXn

  25. rd22

    It’s a pity that the comments section basically consists of people re-tweeting the article to their followers without actually interrogating the claims. Thanks to those who do comment.

    The article claims that ‘Poorer families are in fact paying nearly five times more than the richest to bring down the budget deficit’. Really? To me that sounds like a strange phrase to use? Are the poorer families really ‘paying’, or are they having benefits / allowances etc. taken from them?

    More inaccuracies concerning Labour’s record on child poverty. It is only because of the way we measure poverty that tweaking the redistribution levels can ‘lift thousands out of poverty’ at little cost.

    Then the throwaway remark about the rich bearing ‘a little more responsibility for the recession’. Evidence based political blogging. Yeah, of course.

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