Tag Archives: institute for fiscal studies

Uncomfortable truths from the IFS on public spending and tax cuts but cautious optimism on economic growth

Last week, the highly-respected Institute for Fiscal Studies produced its annual “Green Budget”: its attempt to inject some realism into the national debate on the economy ahead of the chancellor’s actual budget in March.

The document makes for uncomfortable reading in parts, particularly as we head towards another general election in which the complicity of silence on deficit reduction is likely to be as deafening as it was in 2010.

IFS borrowingDeficit reduction: significant progress, but some way to go

Starting with the deficit, the IFS’s conclusions are stark. Had the government not taken steps to increase taxes and cut spending in the years since 2008, they estimate that the deficit would have reached 10% of national income by 2018-19. Because of the estimated 16.7% permanent reduction in economic capacity caused by the crash of 2008, 98% of that deficit would be “structural” – i.e. would not be expected to reduce naturally once growth picked up:

For an economy such as the UK, this level of borrowing would have been unsustainable on an ongoing basis. Public sector net debt would have increased markedly year-on-year, likely surpassing 100% of national income before the end of the current decade, and 200% within the next two decades.

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Opinion: Who’s been hit hardest by the coalition’s cuts?

The budget on March 20th is likely to concentrate on growth, on avoiding an ‘omnishambles’, and on fighting the notion that Osborne has taken the country from triple A to triple dip. But it’s also the time to take stock of who’s bearing the brunt of (attempted) deficit reduction. This graph shows the combined effect of all the coalition’s tax and welfare changes, as modelled by the Institute for Fiscal Studies. It doesn’t look good.

Impact of modelled tax and benefit reforms since Jan 2010, by income decile group (Copyright of the IFS*)

The blue …

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IFS verdict: Labour’s 10p tax idea “has no plausible economic justification”

institute-for-fiscal-studies-logo-370x229Ed Miliband’s announcement yesterday that Labour will re-introduce a 10p starting rate of income tax paid for through the introduction of Vince Cable’s mansion tax has received a tepid response from the Institute for Fiscal Studies. The IFS put out a note yesterday headed simply, Better options exist to help low earners than 10p tax rate:

A 10p tax rate would reduce taxes for those on low incomes and strengthen their work incentives. A far simpler and more sensible way of achieving these aims would be to spend the same

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Making work pay – how taxes should work better for the ‘squeezed middle’

The Resolution Foundation helped give birth to the phrase ‘squeezed middle’: that group of low-income individuals and families just above the threshold to qualify for most welfare help, but only just able to make ends meet, and always in danger of slipping back into poverty.

Today they’ve published a report written by Paul Johnson, Director of the Institute for Fiscal Studies, identifying key reforms that could allow the tax and welfare system to redistribute more efficiently. Here’s the summary-of-the-summary:

Simply making the current system more generous to those on low incomes will not be sustainable in the long run. Reforms to

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Opinion: both private and public sector pensions need improving

There are two fundamental problems with the analysis by the Institute for Fiscal Studies of the current negotiations on public sector pensions.

Firstly, the IFS compares public sector pension provision with that of the private sector and implies that the inevitable disparity has to be rebalanced by cutting the public sector rather than improving private sector provision.

Secondly, they choose to ignore the approximately £100 billion saved by moving from RPI to CPI and then says that if you exclude £100 billion and the fact that retired public sector workers’ pensions are going to have lower increases than before, they are better off.

But this …

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The Independent View: Lib Dems need to champion new ideas for tackling child poverty

Figures released this week by the IFS show that the UK will witness a severe and sustained increase in child poverty over the coming decade, with almost a quarter of British children set to be living in relative poverty by 2020, compared to one fifth in 2009/10. This is despite a projected 7 per cent reduction in real terms median income over the next three years, reducing the amount of income it takes to cross the poverty line.

These figures highlight the growing gulf between the targets set out under the Child Poverty Act, which require the government to reduce …

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Educational Maintenance Allowance: how hard is it for the new policy to be better?

Yesterday Michael Gove, finally, announced the government’s proposals for replacing the Educational Maintenance Allowance (EMA) scheme. As previously trailed, Liberal Democrat pressure has secured more than £100m extra for the plans.

The £180m being spent on the new scheme compares to the £560m cost of the EMA. At first glance, that is a large cut. But if you view the key objective for the funds to be helping more people to take part in post-16 education, then the picture looks very different. That’s because several different studies of EMA concludes that the vast majority of its funds went to people …

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