25 August 2010

The Tory Libdem Treasury ministers said that their June 2010 budget was about fairness and the rich were more adversely affected than the poor. Charities and commentators have robustly challenged that Treasury view and in several posts I have tried to show the adverse effect of some of the measures on the poor and vulnerable in Cornwall.

Now the Institute for Fiscal Studies (IFS) has published its revised and authoritative analysis which shows that the overall effect of the Tory Libdem ’emergency’ budget was regressive in that the tax and benefit changes hit the poorest households harder than the better off. Read the report and the evidence it provides. Note that it says Labour’s tax and benefit plans of March 2010 were progressive.

Two measures mainly make for the regressiveness. First, cutting benefits which affects the low-income households more than the better off. Second, linking benefits to the lower consumer prices index (CPI) in place of either the retail prices index (RPI) or the Rossi index will reduce those benefits. That reduction will total around £6 billion in five years time. An explanation of differences between the indexes begins at page 15 of the IFS analysis.

I wonder what the Cornwall Libdem MPs, who welcomed the budget as a “step forward for Cornwall and the country,” now think of it in the light of the latest IFS findings?


Tory Libdem budget June 2010