Coalition puts up strong defence on IFS report

There’s a standard approach people take to reports. If the report happens to back up our position, it’s right – and we certainly don’t need to go as far as reading or critically appraising it to figure it out. If it goes against our view, there’s probably something dodgy about it. Human nature – can’t beat it.

And so it is with today’s report from the Institute for Fiscal Studies (IFS). Depending on how you read it, or which claims you want to pluck out, the report says that the 2010-11 budget is regressive, or perhaps slightly progressive.

Here at Lib Dem Voice, we aren’t going to pretend to have fully read or understood the report, not in the few hours we’ve had this morning anyway (you can read the press release (pdf) and the full report on the IFS website).

Labour, as you would expect, have leapt on this as proof positive of the evils of the Coalition Government’s economic policy.

They weren’t quite as keen to endorse a similar IFS report just a few months ago.

Back at the end of April, just a few days before the General Election, Labour were in no doubt that an IFS report critical of their government was riddled with errors:

Labour Treasury sources said the whole IFS attack was misleading, and had done nothing to improve public understanding because the IFS was wrongly implying the political parties were duping the electorate by not setting out spending plans beyond the next election.

And you can be sure that most of the people who trashed that report in April, along with most of the people canonising this latest report, have neither read nor understood either.

Some people on the Coalition side have read the report and, you’ll be shocked to hear, haven’t been persuaded.

The Government argues that it makes no sense to isolate the June budget, rather than looking at the changes taken as a whole. There’s a point there – the Coalition was amending a recent budget and from the perspective of us on the ground, the final result is what matters, not how many slices the decision-making process was cut up into.

The Government also points out that the IFS analysis has some rather large gaps.

For example, a big Coalition drive is to get people off benefits and into work, with Treasury forecasts suggesting that the jobs market will grow overall despite some shrinkage in the public sector. The IFS analysis assumes everyone’s circumstances remain the same, but if significant numbers move from benefits into paid employment, they’ll clearly be better off.

This is, of course, an issue dear to Clegg’s heart  – it’s all about social mobility, equality of opportunity and real chances. That isn’t always captured by neat graphs dividing the population into deciles.

For example, that poorest 10% of the population will include people in genuine need, but it will also include some ex public school students studying at Oxbridge and doing very happily on a low income.  On the neat, tickbox approach, giving those students lots more money will improve the figures, but Liberal Democrats will tend to want to look beyond the bar charts and seek to improve the real life chances of the people behind the statistics.

Another counter-argument from the Government looks to take the longer-term view. It’s argued that the deficit has to be cut and failing to do so will have a far more damaging effect on less well off people in the future than any of today’s cuts will have now.

And that, of course, hints at a big issue. Wealthy people need less Government support than the poor, so if you want to make significant cuts to spending, those cuts are nearly always going to fall disproportionately on the poor – you can’t cut money you’re not spending in the first place.

The way to avoid that would be to levy tax increases on the wealthy and the Coalition has made moves in that direction, with Lib Dem policies like the banking levy (forecast to raise £2.5 billion) and the increase in Capital Gains Tax.

It’s also worth noting that, as with all reports of this type, the IFS themselves admit that there’s a good deal of guesswork involved, and assumptions have been made that may prove to be incorrect.

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85 Comments

  • I’m sorry, but the coalition response seems extremely weak. You can’t expect the IFS to build in speculative effects of growth in employment that may never happen and even if it did happen could not be confidently traced to government policies.

    Really, if your defense to claims of hitting the poorest is to talk about a cut in corporation tax, you’re either misjudging your argument badly or are in big trouble.

    And of course this analysis still doesn’t include the impact of cuts in public services, which will naturally hit the poorest hardest.

  • I suspect if you were in oppostition your arguments would be rather different.

    You can wriggle all you like but it does seem pretty clear that it will hit the working poor hardest and you cannot rely on new jobs solving the problem when these jobs do not at the moment exist. It is at the very least a bit of a gamble cutting so deep when it is not necessary according to the OBR and the Govt should own up to this.
    Yes you got your Banking levy and capital gains tax but both are well below what you had hoped for which means that the poor are hit harder proportionally than the rich . Being taken to court because the treasury has seemingly not complied with equality legislation is also not a good sign. So much for fair open govt under the Liberals.

    If the report is proven to be correct over the next few years then the Lib Dems are in serious trouble. Everyone knew this was what the tories stood for but it is not what the Lib Dems stood for at least up to May when Clegg changed his mind on the economy without telling the public – or the party?.

  • ‘we aren’t going to pretend to have fully read or understood the report, not in the few hours we’ve had this morning anyway’

    Then why comment on it? surely it would of been better to read it fully, digest it and then make comment, to do anything else appears to be nothing more than a knee jerk reaction in defence of the budget, it smacks purely of ‘towing the party line’ and bugger independent thought, something I believed was a liberal virtue.

  • That was almost as pitiful a defence as mounted by the minister on Today this morning.

    Firstly, what Labour thought of the IFS in April and what the Coalition thinks now is irrelevant – the IFS is widely recognised as the leading economic thinkthank in the UK and if it says the budget will hit the poorest hardest, then that is the story not whether political parties treat IFS consistently.

    Secondly, ok, the coalition ammended the final Labour budget. That’s true. How did they ammend it? They looked at Darling’s progressive measures and said ‘we can’t have that’ and introduced a whole load of regressive measures. You must be very proud of your ammendments.

    Thirdly, if you seriously think the poorest 10% of society is really just elite former public schoolboys slumming it at Oxbridge then you’re so far out of touch its unreal. Look at the charts! FAMILIES WITH CHILDREN do worse out of the budget with every decreasing decile. FAMILIES WITH CHILDREN not Oxbridge students. Commonsense and some appreciation of what Osbourne actually did would tell you that – he cut benefits to mothers, families, children and the disabled and tagged all benefits to a lower tracker of inflation. That isn’t going to hit Oxbridge students and to suggest otherwise is wilful ignorance.

    Finally, yes increasing taxes on the wealthy would mean less cuts on the poorest and yes the government did do some of that. However, it obviously decided that that wasn’t the way they wanted to go because, if they had, the budget would have been progressive. It isn’t. It’s regressive. Highly regressive.

  • ‘For example, a big Coalition drive is to get people off benefits and into work, with Treasury forecasts suggesting that the jobs market will grow overall despite some shrinkage in the public sector. The IFS analysis assumes everyone’s circumstances remain the same, but if significant numbers move from benefits into paid employment, they’ll clearly be better off.’

    I’m not sure I can believe this is an argument? If people’s wages improve they will be better off, of course they will. The point is you can only analyse actual changes (such as the impact of a budget) rather than hypothetical wishful thinking changes. Fact remains that the only possible way to argue the June budget is progressive is to combine it with the previous government’s budget. Looking at the impact of its changes to the overall budget it is regressive.

  • And you can be sure that most of the people who trashed that report in April, along with most of the people canonising this latest report, have neither read nor understood either.

    But you would at least admit that it is more than likely that those on the Labour front bench have read this report?

    .

    but if significant numbers move from benefits into paid employment, they’ll clearly be better off..

    Really? I thought the whole point of IDS’ benefit reforms was about addressing the problem that if you are on benefits you clearly are not better off working. I thought this was the rationale for the draconian measures to be announced.

    .

    Another counter-argument from the Government looks to take the longer-term view. It’s argued that the deficit has to be cut and failing to do so will have a far more damaging effect on less well off people in the future than any of today’s cuts will have now..

    That is not a counter argument, that is an admission. All that it says is ‘if it isn’t hurting,it isn’t working’.

    .

    It’s also worth noting that, as with all reports of this type, the IFS themselves admit that there’s a good deal of guesswork involved, and assumptions have been made that may prove to be incorrect..

    Yes, use that as a counter argument, if you wish, not a very strong one though, even you must admit. Whilst those of us outside of the bunker will use the evidence that appears before our eyes, to form our arguments and judgements.

  • I’m not always a spelling fascist but if posters resort to clichés then they should at least spell them correctly.

    20 times in the back of your book:
    Toeing the party line …

    Now time to digest this PDF.

  • Of course It will be regressive because however you try to kid yourselves it will be a Tory budget.So far I have seen my job which i have performed for 25 years put under threat my sons struggling school sidelined for the local posh acadmy my eldest sons job prospects plummit and funding to help him slashed.The health service my disabled child depends on on atomised and run for shareholders rather than patients.
    Now a few things to remember before your usual accusations start I am not a troll I am not a Labour tribalist my wife parents and I voted for you as an anti Tory option (never again).
    So as someone who put their trust in you becsuse we thought Labour didn’t deserve our vote but have bitter experience of the odious Torys seriousley now what do you have to offer me and my family especially when me and my son find ourselves jobless and labelled scroungers by your new supporters in the press.So Lib Dems compassionate and fair as you claim to be what do you have for this voter and his family who now fear for the future more than at any time scince the 80’s.

  • Wow, the attack bots are out in force today!

  • While all assessments such as those provided by the IFS need to be treated critically, this piece seems to soft-pedal little on the situation. On the basis of the ‘knowns’ the budget measures are likely to be regressive overall. It identifies the switch from RPI to CPI for upgrading benefits as the most important change fiscally, which barely received any attention at the time of the budget. Clearly if the things we know about with some certainty are likely to be regressive the question then becomes whether the ‘unknowns’ will cancel that out and create an overall picture that is more positive.

    Undoubtedly some poverty is transitory, as the piece notes, but to invoke the ex public school student studying at Oxbridge is to imply that somehow the issue isn’t as serious as it might first appear. I’m not sure anyone is proposing to give students a lot more money are they? This is a bit of a red herring.

    The bigger picture is that Britain is a country with relatively low social mobility when considered cross-nationally and those who are poor tend to stay poor. That is the case even if they move into the labour market – the idea that if people move from benefits to employment will ‘clearly be better off’ is questionable. It depends on who they are, what benefits they are entitled to and what they will lose once they enter the labour market. That is the thrust of the IDS reforms, so if he doesn’t (or isn’t allowed to) deliver a more integrated system then it isn’t at all clear that moving into the labour market means people will be *financially* better off. We can equally debate the Treasury projections regarding the number of private sector jobs that are going to be generated and by when. Similarly the idea that that public sector is going to experience ‘some shrinkage’ runs the risk of underplaying what is about to happen. These are all signiifcant ‘unknowns’ at the moment. An optimist would say that they will resolve themselves favourably and the economy will be stronger as a result. But that can only be a hope rather than a promise.

  • “you can’t cut money you’re not spending in the first place.”

    You can however implement Lib Dem policy on focusing currently universal benefits on those who actually need them – THAT would be truly progressive and hopefully will be implemented after all.

  • The IFS report is useful in that it presents a detailed challenge to one of the central tenets of the Coalition – that even in austerity there would be fairness. We should welcome this debate. It’s now up to Nick, Danny Alexander, Vince et al to respond. We cannot on one hand criticise Labour for not doing enough about the poor and then use their measures to cover for regressive Tory ones. If there are other measures planned that would change the IFS analysis over the next year or so we need to have them outlined very soon.

    Particularly in the parts of the country where we are fighting Labour as the principal party we need to be able to respond in an unambiguous and truthful way. We will be severely damaged if we cannot back up what is being said by our leaders. If the leadership cannot substantiate their words then as members we need to do more to challenge their approach.

  • Remember, ‘we are all in it together’ just keep repeating that mantra and maybe just maybe we will start to believe it, then we can dismiss these silly reports from crackpot think tanks such as the IFS and get on with what’s really important, self delusion.

    p.s I’m not a troll just a very disillusioned long time LibDem supporter or should I say a wavering LibDem supporter.

    @ Ed, LOL and yes you are correct, please accept my apology, it was unforgivable or me, twenty times you say? I’ll get right on it 😉

  • Quoth CowleyJon – “maybe best to let the Tories defend their budget instead of pretending that it is ours. Collective responsibility does not extend beyond ministers to entire parties.”

    Surely not. Cameron and the Tories would not be in power without Liberal Democrat support, hence the parliamentary party and the membership IS responsible. We’re keeping the sods in power, we’re making it possible for these grotesque attacks on the poor to take place. I find it almost incredible that the party I’ve campaigned and worked for all these years is quite prepared to throw thousands of peoples’ jobs overboard, while at the same time wittering on about social mobility. Well, the unemployment roles go up by tens of thousands, that’ll be downward social mobility, I guess, eh?

  • Grammar Police 25th Aug '10 - 11:43am
  • I’m sorry, but the IFS statement is that the changes made in the emergency budget were regressive. Now, the coalition can argue it makes no sense to isolate it, but they’re missing the point – the amendments they made were regressive.

  • Grammar Police 25th Aug '10 - 11:46am

    @ Mike – there’s no pretending this isn’t a largely Tory budget, but there *are* progressive measures in there – which very well may not be in there otherwise.

    I guess you’d just have preferred another election straight after the last, one where we got wiped out? A majority Tory Govt would then have been much more progressive.

  • charliechops1 25th Aug '10 - 11:50am

    There is a standard defence of any charge against the economic policies of the Coalition: deny, confuse, obfuscate and hope that enough people don’t understand arithmetic any way. Hey ho, the lads.

  • Grammar Police 25th Aug '10 - 11:54am

    @ Nathan, the emergency budget could have reversed any of those changes made only a few months before, the it did not happen in a vacuum. However, you are right to say that the net effect of the June budget is to make the overall picture slightly less progressive, on the assumptions made by the IFS on benefits.

  • @nige: Then why comment on it? – because plenty of others haven’t seen fit to hold back. So that was a silly point.

    Two questions:

    1) Something can be both regressive and progressive surely, hitting the richest at an increasing rate, whilst still hitting the poorest by slightly more than the next up decile?

    2) A lot of this seems to me to relate to the VAT hike. In my view, this would only have been an acceptable thing if it had come with an expansion of the exempt list. Could this be done?

  • @ Grammar Police: the June Budget could also have abolished income tax and cut all benefits. Should we therefore also count the entirety of income tax and the welfare state as part of the ‘overall picture’ when judging whether the June Budget was progressive?

    @ Iain Roberts: “we aren’t going to pretend to have fully read or understood the report, not in the few hours we’ve had this morning anyway” – the report is only 30 pages long. Put the work in next time, especially if you’re going to moan about other people commenting without having read it.

  • *Wealthy people need less Government support than the poor, so if you want to make significant cuts to spending, those cuts are nearly always going to fall disproportionately on the poor*

    Err, which is more or less what everyone was saying in June when Clegg and Cable were denying it.I’m glad you can finally admit this much at least.

  • For example, a big Coalition drive is to get people off benefits and into work, with Treasury forecasts suggesting that the jobs market will grow overall despite some shrinkage in the public sector. The IFS analysis assumes everyone’s circumstances remain the same, but if significant numbers move from benefits into paid employment, they’ll clearly be better off.

    Oh, but wait, what’s this then?:

    http://blogs.ft.com/westminster/2010/06/david-cameron-pitches-another-20000-people-into-90-per-cent-marginal-deduction-rate/

    The budget increased marginal tax rates on the poor.

  • I am still reading it but am surprised (not really) that this hasn’t got more coverage:
    “the richest tenth of households lose the most in both cash and percentage terms”
    or table 3.1 which shows highest decile lose 6.2% of income, lowest decile less than .5%
    or Table 3.3 which shows (2010-14) 1% reduction income for bottom decile, 6.8% reduction for top

  • Chris Gilbert 25th Aug '10 - 12:18pm

    How is it that our party analysed the Tory budget before the election and realised that wholesale public sector job cuts would harm recovery, then after the election, suddenly that’s no longer true?

    My own council is talking about 3000 job cuts over the next three years. That’s 3000 more private sector jobs which are needed, just to keep people off benefits. Then of course, we are cutting benefits too. The tax cuts only go to people who are working – that’s the point. If you lay off a quarter of the public sector, they aren’t working, are they?

    Stop apologising for Tory policies and calling them ‘coalition’ policies. These are nothing of the sort, and aren’t policies endorsed by the Liberal Democrats as a whole. We are damaging our reputation and our credibility by pretending black is white here. Stop apologising for George Osborne and start showing some backbone and standing up for Liberal beliefs and aspirations.

  • I guess you’d just have preferred another election straight after the last, one where we got wiped out? A majority Tory Govt would then have been much more progressive.

    Are you suggesting that no matter what the Tories propose, Liberal Democrat MPs should support it? What happens if David Cameron was Joseph Stalin and wanted to send everyone to the Gulag?

    Extreme and obviously not gonna happen, but I say it to illustrate the point that we all have red lines that we won’t cross. The question then is: where should that red line be? I would say it makes sense to compromise on the timing of deficit cuts. But I would say if you give the Tories that, it would just plain wrong to also compromise on the distribution of the deficit reduction. If Lib Dem MPs aren’t keeping the Tories’ economic policies fair, then what are they for? Why be in government just to hit the poorest hardest?

  • Grammar Police 25th Aug '10 - 12:23pm

    @ Tom; er, actually, yes. In general terms I think you should look at the whole system to determine how progressive it is.

    But we’re rather missing the point, this is an emergency budget; an amendment to the changes set out in the main budget earlier in the year. The measures set out by Darling haven’t actually taken effect; the emergency budget is intended to adapt them. Therefore, when judging the emergency budget, you should look at the cumulative effect of the previous measures and the new measures, as they have been considered as part of a whole “changes to make in 2010 budget” process.

  • Grammar Police 25th Aug '10 - 12:30pm

    @ Alex, no but those who reject any compromise at all (I mean, are any of you *actually surprised* that this is more a Tory budget than anything else? I mean, they only got the largest share of the vote and won the most MPs by far). IMO we need to be realistic.

    The only alternative is a majority Tory budget and I’d reckon most of us would prefer not to see that happen either – it would be an awful lot less progressive than what we’ve got now.

    I’m not going to pretend I’m happy with aspects of the budget, or some other things the Tories are doing, but I do get annoyed by those who seem to think that we should never ever have worked in any way with the Tories. I joined a political party, not a pressure group. I want my party’s MPs in Government, and for a party that supports PR we’ve got to be able to make coalitions work. And as part of that process you win some aspects and you lose others. Increasing the personal allowance was a win, increasing CGT was a partial win, VAT increase was a loss etc etc.

  • @nige: Apology accepted – accept mine for pedantry as well please!

    Right, have waded through the report now. Which is worthwhile if you have a bit of patience and are happy to read figure labels 10 times or so to work out what they are describing. They don’t differentiate very clearly between changes to the Labour budget, combined effects, effects with/without indirect taxes etc.

    On the fairness side, it should be pointed out that, in any interpretation, the greatest burden of the budget falls on the richest decile; though it’s also fair to say that this is something that is kept from the Labour budget rather than added (surprise surprise).

    It should also be pointed out that, up to 2012, the total direct tax and benefit changes (as a percentage of income) are pretty flat and small for deciles 1–9 and much more severe for decile 10. It’s when you look at the post-2012 changes that the changes look regressive in deciles 1–9, though the richest 10% still take the biggest hit. The big nasty for low-middle income people is going to be the lack of availability of work in the public sector, not tax and benefit reform in the near future.

    Obviously there is an argument to be had about whether redistributional tax (though ‘progressive’ by definition) takes people out of poverty effectively, but the impression the IFS report gives me is that the richest are the only people that will take a big hit (in direct tax/benefit terms) for the next 2 years and, in the meantime, we have a time frame to propose a more progressive distribution of budget amendments for 2012 depending on how the economy and unemployment situation is by then.

    It would be great to see some independent suggestions for budget tweaks from the Lib Dem back benches after September’s conference.

  • Grammar Police 25th Aug '10 - 12:50pm

    At what cost? At the cost of having a Tory majority govt (if we had another election) or a Tory minority Govt reliant on it’s right wing, that’s not progressive in any way, shape or form, thanks.

    It’s highly amusing to watch Labour supporters trying to justify their opposition to everything the current Government does, deluding themselves that they are actually backing a progressive party as opposed to just enjoying the benefits of being in opposition.

  • Anthony Aloysius St 25th Aug '10 - 12:50pm

    As a result of the discussion of the previous IFS comments on the budget and on whether increasing VAT was regressive, it became clear that the data on household expenditure they were using then were subject to very large uncertainties. Maybe they’ve got hold of some fresh data in the last couple of months, but having wasting quite a bit of time trying to make sense of their previous pronouncements I don’t think I’ll repeat the exercise myself.

    But it will be very interesting to to hear the comments on this new IFS report from those party loyalists who were previously making comments along the lines of “I don’t understand all the details but I trust the IFS.”

  • Grammar Police 25th Aug '10 - 12:51pm

    Er, sorry, “its right wing” :o)

  • @Chris
    “My own council is talking about 3000 job cuts over the next three years. That’s 3000 more private sector jobs which are needed, just to keep people off benefits. Then of course, we are cutting benefits too. The tax cuts only go to people who are working – that’s the point. If you lay off a quarter of the public sector, they aren’t working, are they?”

    But there is no alternative to this. we couldnt go on borrowong £160bn, one pound in four, a year, as the problem would be worse in the future

  • The IFS report was commissioned by a child poverty pressure group.
    So it gives its paymaster what it wants.

    The IFS agrees that the budget is progressive up to 2012. But how can it predict beyond that when there are further budgets and measures to come?

    As for economics …. just where is the money going to come from to fund all Labours left over spending when the deficit is 150 billion the structural deficit 90 billion and the interest on our debt (heading to 1.4 trillion) is heading beyond 35 billion annually.

    So not cutting spending means spending ever more on just servicing the debt which means either less for departments or more borrowing which means …

    But sorry – I forgot – I am talking to economically illiterate lefties.

  • TrevrosDen – thanks for putting us all right including the IFS. Ofcourse we will all bow before your economic wisdom.

    If this was all so clear to the Liberal Democrats before the election then why was it not in their manifesto?

    No one is saying that there shouldn’t be cuts but the OBR (which i presume is immune from giving what its paymasters ask of it – unlike the IFS) said that the cuts plan put forward by Labour were adequate. This would have saved us from some of the drastic cutting but was ignored by Clegg after his overnight conversion (he struggles to remember which night it was but it was before the election – he just didn’t tell anyone) to getting rid of the deficit in 5 yrs – which was in no ones manifesto.

    If being concerned that a budget is going to hit poor working families more than the rich makes me a leftie then I suppose I am one of those. It is also what I thought the Liberal Democrats stood for.

  • Sad to see such defence of the indefensible – we’re now discovering who stands for something, and who will fall for anything. LD’s have the deciding vote – the government cannot get anything through without either LD or Labour support, so proportionality really isn’t so important. This is a government that can’t legislate without the Liberal Democrats, as such, what goes through does so with LD support, this feeble excuse that we’re only a sixth of the government seems to ignore that completely.

    I’m not a religious man, but this springs to mind : “What shall it profit a man, if he gains the whole world, and suffer the loss of his soul?”

  • David Allen 25th Aug '10 - 1:41pm

    “The only alternative is a majority Tory budget and I’d reckon most of us would prefer not to see that happen either – it would be an awful lot less progressive than what we’ve got now.”

    That’s the nearest thing to a good argument we’ve seen from the coalition supporters. It makes a refreshing change from the cant, obfuscation and special pleading which so many coalitionists trot out – and which frankly makes me ashamed to be a Lib Dem. Not primarily because it is right-wing cant. Mainly because it is just cant, it is so dishonest and self-serving, and I thought we as a party were better people than that!

    I agree that a Tory budget based on some sort of “confidence and supply” agreement with the Lib Dems is the only realistic alternative. Three months ago, I would also have agreed that it was a worse alternative. I don’t any more. Norman Tebbit has explained that the Lib Dems provide “cover” for the Tory government, and enable it to move further and faster to the Right than would have been possible if the Tories were on their own. Is that where we want to be?

    I agree that we couldn’t conceivably think of turning to an alliance with Labour at the moment. They are leaderless, they have a lot of rethinking still to do, they spurned us three months ago (and OK, to some extent we also spurned them), and the maths doesn’t really add up.

    I agree that if we ditched the coalition, we could not act to precipitate another election. So we would have to set up some sort of “confidence and supply” arrangement, which in hindsight is what we should have done three months ago. We would of course lose the AV referendum and a few ministerial salaries, but really that’s about all.

    What would we gain? Well, regaining our self-respect for a start. But if we merely salved our own consciences, while leaving the nation with as bad a government as we have now, we wouldn’t have gained enough.

    I think we would have to allow the Tories a fairly free rein in handling the deficit and determining their own economic policy. But we could reasonably draw some red lines that they could not cross without losing our “confidence and supply”. They would have to govern as what they are, a minority in Parliament. The wholesale privatisation of education and health would have to go on the back burner. The worst of the benefit cuts could probably be reversed too.

    It would not satisy everyone. It would just mean playing our weak-ish hand a little more effectively. It would be a great deal better than carrying on as we are.

  • it works both ways,the ifs report attacking labour a while back was supported by the parties making up the ConDem coalition !

  • And the argument that taken in conjunction with Darling’s measures, the budget is progressive, doesn’t wash either. As all you are saying is, that, taken as a whole this budget is more regressive than it need be.

    And the argument that if it was a majority Tory budget it would have been more regressive, is of little comfort to very few.

  • Mike(the Labour one) 25th Aug '10 - 2:10pm

    I think it was more than “to some extent” that you spurned Labour. Clegg laid the ground for it when he chose to favour the largest party regardless of its policies- and there was something on Guido Fawkes the other day, a document scanned in, showing that the coalition had been decided far earlier than we’ve been led to believe- http://order-order.com/2010/08/24/the-hand-of-god/

    I think you should see it through and focus on getting AV. Ditching the coalition now would, I think, damage the Lib Dems far more than staying the course, the same things would happen except without any electoral reform and it will all have been for nothing. People here were saying that failing to reform parliament now would “kill electoral reform for another generation”.

  • Mike(the Labour one) 25th Aug '10 - 2:28pm

    “The IFS report was commissioned by a child poverty pressure group.
    So it gives its paymaster what it wants. ”

    Oh yes, child poverty pressure groups, the insidious enemy within.

  • The Tories are a minority party and without LibDem support cannot put through some of these regressive measures. I think that some of the drastic cuts that the Tories are proposing should be left until they have a majority in government. Until then, LibDems do the decent thing and protect the poor of this country while you have some power to do so.

  • I personally have some concerns over the budget proposals, but what you never hear from some critics of the coalition is that the highest earners are in fact facing a significanty higher rate of income tax than was most of the case under the 13 years of a Labour Government.

    At present the top rate of income is 50% – for most of the years from 1997 to 2010 under Labour it was 40%.

    http://www.adviceguide.org.uk/index/life/tax/income_tax_rates.htm

    Of course the budget amendment also increased slightly the tax on capital gains, while also lifting the tax allowance for when people start to pay income – taking a lot of low earners and pensioners completetly out of paying income tax.

    If the coalition had reversed the 50% rate (which started I think only in April of this year) , had cut inheritance tax and had cut capital gains some of the claims being made by the critics of the coalition for supposedly carrying an all out assault on the poorest in the county would make sense. The facts are however somewhat different.

  • Roger Shade 25th Aug '10 - 4:47pm

    I am a Libdem and have always believed that the people who have benefited most in the last 10 years are the people who should be bearing the greatest burden when we cut the deficit. It has been clear from the first moment Osbourne opened his mouth that this was not to be, I did not require the IFS to tell me it was a regressive budget. I have never heard such pointless drivel as the latest defence by the Treasury, ‘we have cut Corporation Tax and that will create more jobs and that is progressive’. The name gives it away, Corporation Tax is a Tax on Companies if you cut it you put money into the pockets of shareholders they will only increase jobs if you create demand, and you wont do that if you take money out of the pockets of the least well-off.

  • Liberal Not Democrat 25th Aug '10 - 5:43pm

    Love it, all the sandals and muesli Lib Dems are spitting feathers over this report. Good. Hope it drives these SDP leftovers out, people who are only here because they didn’t have the balls to go with Labour and be associated with their terrible record on civil liberties, foreign policy and helping the poor. Maybe now they’ll go back to where they belong and let us get back to proper classical Liberal values.

    The report itself actually can be read two ways (depending on how you interpret it), that either the budget is regressive or mildly progressive. As per usual the Guardian was extremely selective with their reporting and pushed the regressive argument. Anyhow, Government policy should not be dictated by think-tanks. Especially when they define the ‘progressiveness’ (a stupid term anyway) of the budget on how much money the state is chucking at people. We’ve tried that for the past 13 years and it didn’t work. For better or worse, I’m going to wait until the next election before I judge their performance.

  • One of the fundamental things that most people who came into Liberal Democrat politics for was to work towards a fairer society. We HAVE to make sure that progress towards this is achieved by the coalition government: it is not a question of pointing out that we only have a minority influence on the government, or that a Tory party governing on its own would be much worse. There is no point in us being part of a government which pursues policies which widen the gulf between the rich and the poor: this is a red line issue.

  • Ray Cobbett 25th Aug '10 - 6:26pm

    It;s odd that the IFS should come out while Nick ‘holding the fort ‘ I suppose it fits in with the Tories ensuring our fingerprints are on the axe not unlike the picture of Nick and Danny flanking Osborne during the budget speech. We should deal with IFS on its merits not with harping references to Labour. The cuts are too deep for good reason and that is the old Tory one of rolling back public services to make way for the private sector. Most people now see the Greek reference as a gross exaggeration and what really worries bond holders is the UK heading for double dip recession courtesy of Georgie’s GCSE Economics. Where’s Vince in all this?

  • @George Kendall
    I was hoping the report might have been a watershed where Messrs Clegg and Alexander stopped acting as Osborne’s cheerleaders and adopted a more nuanced approach. Our voters expect us to act as a brake on the more extreme Conservative actions and I felt this report could have been used to help do this. Nick’s reaction was disappointing and not for the first time naive. He seems to be getting poor advice as he seems intent on lashing himself to every Conservative policy without obvious reservation Maybe behind closed doors we will now see a shift.

    I suspect the IFS report will affect the thinking of many members and perhaps mark the beginning of a new more critically supportive view of the Coalition

  • Do you think DC knew the IFS report would be damning and so made sure SamCam had a caesarean to have the baby early so he would not have to deal with the fallout and let Nick carry the can again? How often is this going to happen before you realise what the Tories are doing to the LibDems?

  • Ian mitchell 25th Aug '10 - 7:47pm

    Not sure what all the fuss is about..
    Its a Tory budget after all so why is it such a shock that it turns out to favour the wealthy over the poor.

    I bet there’s no big concerns on conservative voice (or similar such thing) about this.
    They know exactly what they expect from a tory budget and I it looks like they got what they hoped for.

    We are all in this together my ****

  • This is only the beginning.

    Once the Tory cosh is fully brought to bear on the poorest on society, because of deep rooted Conservative ideology and contempt for that section of society, these will be remembered by the Liberal Democrats as the halcyon days of the Coalition.

    Clegg must snap out of his daydream of Cameron adoration and differentiate himself and is Party from the rabid rightwing Tory agenda. Clegg must attack and strongly dissociate himself from the regressive Tory Policies and measures that his grassroots will rightly view with utter despair.

    If he does not do so and soon, then he will destroy any public sympathy left for the Liberal Democrats and his Legacy will be summed up by all in just four words.
    “Clegg is a Tory.”
    And because of him the Party will also be dismissed with that lethal attack line.
    “The Lib Dems are just Tories.”

    If the excuse is that these aren’t Lib Dem Policies because we’re just a small Party in a Conservative Government, then Clegg and all those who are now happily in the employ of the Conservative Government must take to the airwaves, newspapers and media, start denouncing loudly that which Lib Dems do not have to be told is clearly wrong and STOP this mindless cheerleading of anything Cameron does.

  • I am really pretty angry about this debate and the way it has been framed. It just proves that people never let the facts get in the way of a good preconceived idea. I HAVE read the IFS report and I would say the following:

    First of all should be double underlined that it was commissioned by a left leaning organisation (trustees include the general secretary of the NUT) which is likely to be instinctively hostile to the Coalition and favourable to the interests of the Labour Party.

    Secondly, the IFS has been highly selective in the single analysis it has used to headline its report. In some sections (Appendix A1) it actually admits that the changes may actually be redistributive towards the poorest and that its headline finding depends on its OWN assumptions.

    This report chooses one particular slice of the data out of the many available. It just so happens that this data ‘slice’ is the least flattering to the government.

    So to all the ranters out there: shut up until you have read the report and can understand what it actually means.

  • Am I the only LDV reader who is both a party member and an IFS member? I suspect so.

    The IFS are clearly right in their own terms, and that is important. We need to make sure that when the good times return – and they will, as economies are cyclical – that those budgets are progressive. Deciles 2-9 are key – the top and bottom have all sorts of oddities in them. The £10k tax allowance is key to this one.

    The other key policy is the pupil premium, which has the potential to hugely reduce intergenerational inequality. What we don’t know yet is how much money Osborne/Alexander will release for this. If it is a lot then I think we can look the electorate in the eye and say “Yes, poor families with kids have taken a kid, but they are – for the first time – getting a decent education”. I would be happy to fight an election on that basis.

  • Ian mitchell 25th Aug '10 - 8:29pm

    If the IFS is so left wing why did Clegg quote its findings so regularly at the election

  • Sorry, but the predictable partisan rants against the IFS for daring to tell the truth are of course complete rubbish.

    From the Mirror and I only quote them because they have the most aposite Osborne quotes..

    “According to Treasury minister Mark Hoban the IFS study was “selective.” How times change. When in opposition the IFS was the Tories’ favourite think tank.

    In a Commons debate on April 6 2005 George Osborne praised the IFS as being a “much respected independent insitute.”

    He sang its praises again in the Commons on 22 March 2007, when he said “As often happens, the Institute for Fiscal Studies has looked into the figures, and it has confirmed that it is a very substantially tax-raising Budget. Will the Minister now confirm that the IFS is right?”

    And again on 31 January 2008 he referred to the “damning and independent report by the respected IFS”. On May 21 the same year he quoted the IFS to claim millions would be worse off as result of the abolition of the 10p rate of income tax.

    And on November 26 2008 he seized on an IFS report as “confirmation” that Alistair Darling’s changes to the tax system would hit those on middle income.

    But my favourite is George Osborne’s opening line when interviewed about Labour’s last Budget on 26 March this year: “I am waiting for the Institute for Fiscal Studies’ analysis.”

  • @ Bob

    The IFS itself is not the target of criticism, it is the selective nature of the conclusions of this particular report. Hysterical ranters here are taking one particular slice of the data and presenting this as being an attack on the poor.

    If you look at the report, it contains different ways of looking at the figures and some of these suggest that the poor will be hit less than the rich.

  • @ Ian Mitchell

    It is not the IFS that is left leaning, it is the End Child Poverty Campaign, which is left leaning. They commissioned this report.

  • Ian mitchell 25th Aug '10 - 9:53pm

    Most of us are selective with info.
    The newespapers we read is usually the one that conforms to our prejudices most closely.
    Its quite reassuring.

    I don’t read the daily mail or daily express for example.
    I imagine George Osbourne does though.

    I still think that, on balance, the tories, including in this budget ,will be looking after their own.
    Its sad the liberals are enabling them to do it but at least when you’ve had your housing benefit cut or lost your job theres still the pupil premium (I’ll give you that) and the reduction in corporation task to soften the blow!

  • Anthony Aloysius St 25th Aug '10 - 9:56pm

    Just looking at those two charts in the press release, can anyone explain why the richest income decile is suffering a loss of more than 4% of its income in Fig. 1, but when in Fig. 2 that decile is split into three subsets, each of them is suffering a loss of only around 1% of its income?

  • John Coleman 25th Aug '10 - 9:59pm

    Irrespective of the IFS report, the June Coalition budget is regressive: chart A2 on page 68 of the Chancellor’s statement shows that while the richest 10% of households will bear the biggest hit, as a proportion of income, the poorest 10% will be hit second hardest. Those in the middle ground will (comparatively) be spared the worst; for full details, type “dg_188581.pdf” into any good search engine.

  • All economic analysis and reports can be spun and aspects of it attacked by those who disgree with them.
    The very nature and complexity of economics makes that not merely predictable, but inevitable.
    But the broad thrust and conclusions of the report were crystal clear and the IFS headlined it as such.
    Far from being progressive the overall effect of the Budget was regressive. The poorest would suffer more than the richest.

    What makes this all the more risable is that Osborne trumpeted the Budget as progressive long and loudly.
    It is Political inexperience and incompetence to spin your entire Budget as one thing when it will be found to be the complete opposite. But it then enters the realm of Political slapstick and farce for Osborne when the spin is found to be lies by an independent economic source he himself described as “much respected” and used time and again to attack his opponents when it suited him. Pure hubris from Osborne as usual.

    Osborne’s spin on the budget as progressive was questioned by many at the time.
    Feel free to question aspects of it, but be in no doubt that the IFS are not being misrepresented in their conclusions, and their work is indeed widely respected so partisan attacks on it can be safely discounted.

  • Rob Sheffield 25th Aug '10 - 10:58pm

    It is hugely ironic that the Treasury this morning (including the car crash radio 4 ‘performance’ of Hoban) stated that ‘it does not accept’ the report of a highly rated fully independent academic and policy research think tank. Nicholas has since stepped up and said the same while valiantly keeping a straight face. I seem to remember- just a few months ago- similar spats between the previous Treasury team and, oh yes, the IFS ! Spats that were highly criticised by the then opposition and LD activists here. We were promised it was all going to be so different. But it isn’t.

    Nick Clegg (and his band of merry Orange Men) do not represent either the mainstream or the left of the Lib Dems. All Dave’s jokey despatch box horseplay and public school quick wittedness is not going to contain the perception that this is a government who cynically spun their June budget as progressive (Cleggo to the fore of this) and have now been embarrassingly found out: by one of the few organisations that the man n the Clapham omnibus actually listens to.

    This terrible mess is both Nick and Dave’s fault- to understand why go back to the birth of the whole thing. On the continent they take upwards of seven weeks to create coalitions. In the main these coalitions are made up of parties and party-groupings who had indicated in their pre election statements-of-intent that they would work with each other. They take several weeks because what they end up with is a genuinely blended platform. That is not what happened here. Dave gave too much away socially for his right wing (though personally believes in it); Nick gave too much away economically for his left wing (though personally believes in it). We don’t have a coalition government we have a Lib Dem government on some matters of social policy and a Thatcherite government on matters of economic policy. It’s not coherent or logical because it is not a properly blended continental-syle coalition.

    Over the first 100 days in-the-main the social agenda of the government has led the headlines- gaining praise from some unlikely sources. But at the end of the day it’s the economy stupid and you can be as civil libertarian as you like but you will still end up with headlines like “Osborne’s budget described as ‘clearly regressive’ by respected think tank“ and the UK’s poor, children and old are still going to suffer- no matter what your foreign policy is or attitude to CCTV/ Speed cameras. If the coalition don’t win the IFS report news-cycle over the next 72 hours and into the BH weekend that will be a significant knock to their ‘economic’ and ‘fairness’ credentials. Remember Nicholas was at the forefront of the ’this is a progressive budget that will increase fairness’ cheerleading back in June. What Simon Hughes says (or perhaps does not say) is going to be interesting….

    An orderly transition to confidence and supply minority Tory government would be my advice (and IMHO was what the election result actually translated as). But that’s not going to happen. I think a LD split- with the orangies supporting Cameron all the way to their bitter dénouement in 2015 is more likely today than ever.
    😆

  • “Selective” is a wonderful word, isn’t it? It means “Well, I’d really like to say that you are biased, or unfair. Unfortunately, you can prove that you aren’t. So I’ll call you “selective”. That’s a weasel word which means whatever I want it to mean – and so it’s impossible for you to prove that I’m wrong!”

  • “Selective” is also the word the Conservative Treasury spinner has been hopelessly parroting as he failed miserably to defend his regressive budget today.

  • excellent Newsnight report

    Budget means the poor are only 6 times worse off than the rich under this budget

    enter stage left Simon Hughes

  • Do all those who have posted on this item live in London?
    I had looked through the report. There seems to be no account taken of regional variations in the cost of living and wages.

  • matthew fox 26th Aug '10 - 6:46am

    Depending on how you read it?

    It is there is black and white, the budget is regressive. The IFS report is another nail in the Libdem coffin.

    Nick Clegg is sounding like Thatcher each and every day.

  • BBCIplayer

    Newsnight Wed25th

    3:37 on….

    The background nodding heads now need to come up with something better than the IFS report is partial…..

  • @ Tim Leunig:
    “The IFS are clearly right in their own terms, and that is important. We need to make sure that when the good times return – and they will, as economies are cyclical – that those budgets are progressive.”

    Can you explain a bit further? It sounds as if you’re saying that financial circumstances naturally tend to mean that the poor get hit harder in bad times and do better in the good times. But even if that’s true, shouldn’t we deliberately budget so as to avoid that consequence? As Harold Wilson put it (if I remember rightly!), under hard times it is the strongest backs which should carry the heaviest burden.

  • Could someone tell me when it was NOT a priority of successive Governments to get peple on benefits into work? The Clegg answer is pathetic. Unfortunately all Lib Dem literature to Party members (I ama founder member of SDP then LibDems) is similar to Pravda.

  • Anthony Binder 29th Aug '10 - 8:10am

    Why even discuss if the budget is progressive, when we don´t need IFS to tell us it´s a regressive budget, I thought that was clear to all when it was presented back in June.

  • Brian – I have never been a fan of LD “information” to members, but comparing it to Pravda! Wish I’d thought of it myself!!

    Kehaar – I assume you were proving your own point by referring to pernickity (pernickety) points, and inserting a “whooper” of your own?!

  • PrincessPerfect 31st Aug '10 - 1:38am

    There are numerous flaws within the IFS’s analysis.

    Firstly, the analysis of household income doesn’t really take into accountant specific expenditure differences among different decile groups, which generally overall dictate whether a decile group is worse or better off.

    When they analyze expenditure, they don’t seem to take into account the specific expenditures of different decile groups, and even in the small print within the sources in which may indicate they do, all of those sources supply an information basis which predates the recession.

    Overall, the IFS analyze the budget in general isolation which in real terms isn’t particularly relevant – this budget is generally an amendment to the previous announced plans in April 2010. The IFS’s points the progressiveness of the previous announced measures to pension relief plans & the NI rise – but the coalition are going to look at the pension plans in more detail to build on the previous announcements. Instead one option would be to reduce the amount people can save into a pension to between £30,000 and £45,000 each year. The IFS have not taken this factor into accountant either.

    The government is also going to set up a commission to investigate the cost of public sector pensions. Its early findings are going to contribute to the Spending Review in October with a full report in time for next year’s Budget. This is another factor the IFS have not taken into account.

    The IFS state the budget’s regressiveness is down to largely the VAT increase and the benefit changes – forgetting of course Labour were going to increase VAT as well, plus VAT excludes itself from certain goods (food, drinks, children’s books etc). On benefit changes, these can only been analyzed between 2013 – 2014 as that is the timescale in which the changes come in, but the IFS also do not take into accountant that if the Welfare Plans are implemented, that will change the entire welfare system overall.

    The IFS states that one of reasons why benefit changes may affect low income decile groups is because of the change of RPI to CPI and while CPI is good overall for measuring inflation (better than RPI) it will affect badly those who are not insulated from certain bills generally, and those whose benefits are linked to Rossi more rather than RPI.

    What the IFS forgets during this analysis is that by the time the changes are set to come in (if Welfare Plans do get through) then the structure of benefits in IDS’ may not be suited to either Rossi or RPI – meaning that the new benefits might not affect those who are not insulated from certain bills in a regressive manner.

    The IFS also states due to CB and CTC changes families with children will be regressively affected. What they don’t specify on is the decile group this will occur in within their analysis and whether this decile group will be those on relatively middle class incomes or more.

    The IFS also state those measures which are progressive as a whole will not be enough to offset the regressive measures (it claims are in the budget) concluding that this makes the budget overall a regressive one. They claim this will occur in the 2013 – 2014 duration. Well the problem with this, is that this doesn’t take in accountant so far unspecified important data this year, needed to make an accurate judgement let alone subsequent budgets.

    The IFS also states the increase in the allowance will largely benefit those not in the low decile group – they probably state this due to the CB benefit changes and CTC benefit changes (and again this particular ”regressive” measurement is in the 2013 – 2014 years). But again, the IFS do not know things such as the amount CTC will be increased by in the years 2013 – 2014, and they do not know the future of CB within these years either. The IFS also cannot measure the particular amount the allowance will be increased by in subsequent budgets, (by each budget) as well.

    Overall, I would conclude many areas of the IFS basis for analysis are flawed – flawed enough to consider this report misleading.

  • Some of the comments above are positively Rumsfeldian. We can surely all agree that if we were to allow for the known unknowns and the unknown unknowns that may or may not occur in the future and assume that if they do occur then they will turn out to be changes for the better then overall things will be better than they are now. But I’m not sure that helps a lot.

    The IFS was making an assessment of the budget as presented in 2010. It wasn’t making an assessment of the Coalition government’s entire fiscal performance between now and 2015, including policy changes that haven’t yet – and may never – occur. While the IFS should be scrutinised for its methods in making its budget assessment (although it is surely coincidental that, whatever complexion the government in power, the strongest criticism originates from those who happen to have been on the wrong end of the IFS assessment), it is hardly fair to criticise them for not doing something that they didn’t set out to do.

    There is nothing contradictory in accepting that this budget was regressive overall, but still hold out the hope (or expectation, if you are that way inclined) that when a retrospective appraisal of the performance of the coalition is carried out in 2015 (or whenever) the conclusion is that its overall programme of change was progressive.

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