The winners and losers from today's Budget
Now that George Osborne has finished delivering his Budget speech, we can look at the distributional analysis which comes out when the chancellor finishes his statement.
As we can see from the chart (click to zoom in), the richest bear the greatest burden, but the next heaviest burden falls on the poorest fifth.
As the Budget document puts it (page 20:
“…households in the top quintile make the greatest contribution towards reducing the deficit, both in cash terms and as a percentage of their income and benefits in kind from public services. They also make the biggest contribution overall to funding public spending as shown in Chart 2.B.”
The politics of this isn’t difficult to fathom: hitting the very rich is intended as cover for slashing away at public services – overwhelmingly used by those at the lower end of the income scale.
That said, the chancellor did row back from some of his previous plans to cut spending, no doubt to push back against Labour attacks focusing on spending under a future Conservative government taking us “back to the 1930s”. New Tory plans would take public spending back to something closer to the year 2000. But planned Labour cuts would still be around £38 billion pounds less than Tory cuts.
Despite Osborne’s slight about turn, the OBR verdict on the Budget still says that under Conservative plans Britain wil see “a much sharper squeeze on real spending in 2016/17 and 2017/18 than anything seen over the past five years”.
(Resource DEL, from OBR)
Back in January, the independent Institute for Fiscal Studies (IFS) reported that working parents in the poorest households have been the hardest hit by the coalition’s changes to the tax and benefits system since 2010. As the report put it:
“Tax and benefit changes introduced by the coalition have reduced household incomes by £1,127 a year or 3.3 per cent on average.”
“Low-income households with children lose the most as a percentage of their income from changes implemented by the coalition.”
“For middle and higher income families with children… loss of tax credits and child benefit has more than offset the effect of income tax cuts.”