Emergency Budget Hit The Poorest Hardest
George Osborne’s emergency Budget has hit the poorest hardest, a leading economic think tank has said.
The Institute for Fiscal Studies (IFS) concluded that the biggest losers from the measures announced by the Chancellor in June are low-income households with children.
The report has been seized upon by Labour, with shadow work and pensions secretary Yvette Cooper accusing the Government of carrying out a “shocking and unfair attack on children and families”.
But the Treasury says it “does not accept” the IFS analysis, claiming the report is selective in what Budget measures it included.
The IFS study found that the poorest six tenths of households lost more in cash terms as a result of the Budget’s changes than wealthier households in all but the richest 10%.
The report found Mr Osborne’s tax and benefit changes between June 2010 and April 2014 will cost the poorest 10% of households £422.83.
But those in the second richest 10% will only find themselves £339.12 worse off.
The report builds on earlier IFS analysis of the Budget, which indicated that Mr Osborne’s claim it was progressive – hitting the rich harder than the poor – is mainly down to changes previously announced by Labour.
The new study, part-funded by the End Child Poverty campaign, attempts to reflect the impact of all the benefit cuts announced in the Budget.
“Our analysis shows that the overall effect of the new reforms announced in the June 2010 Budget is regressive, whereas the tax and benefit reforms announced by the previous Government for introduction between June 2010 and April 2014 are progressive,” the report said.
“Low-income households of working age lose the most from the June 2010 Budget reforms 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 IFS also questioned Mr Osborne’s decision to change the way benefits are increased, moving to the Consumer Price Index (CPI) from the Retail Prices Index (RPI) or Rossi index, which would lead to “less generous benefits” in the year ahead.
Ms Cooper said: “These figures show the Government is pursuing a shocking and unfair attack on children and families.
“The Chancellor claimed his Budget didn’t increase child poverty – but only because he deliberately didn’t count cuts in housing benefit, disability benefits and child tax credit that hit families hard.
“The idea that the poorest families with children should end up being hit hardest is appalling and gives the lie to George Osborne’s claim it was a progressive budget.”
A Treasury spokesman said: “The Government does not accept the IFS analysis.
“It is selective, ignoring the pro-growth and employment effects of Budget measures such as helping households move from benefits into work, and reductions in Corporation Tax.”
He added: “Not taking action would have been regressive – burdening current and future taxpayers with the ever rising cost of economic failure.”