The Institute of Fiscal Studies is an organisation after the burdz heart – their capacity and reputation for ruffling feathers is pretty much unrivalled. And they do it in such a nice way too. No mud slinging. Nothing shouty. Just lots of dense economic analysis, politely stated, making it very hard to argue with.
Which is why that Treasury Minister got such a roasting on Radio 4’s Today (read this transcript in the Independent) and then again on Newsnight last night. And it’s why Nick Clegg has been bleating today about this government being fair and progressive and generally sounding very silly. Have this one on me Nick: facts are chiels that winna ding.
Having trawled through the report several times now to elicit understanding, there are two quite interesting conclusions to draw from the analysis, aside from the headline grabbing one that under this Conservative-Liberal Democrat government the poor will get poorer.
First, everyone is going to be mightily pissed off when all these tax and benefit reform announcements take effect between 2011 and 2014. People will get hit at different points when different changes kick in. For some there will be an initial kick. For others, it will be the cumulative impact of small changes. Figure 4.1 in the report makes this crystal clear, laying out the percentage loss per different household type. Thus, a lone parent not in work will lose nearly 7% of net income but a family with children with one earner will also lose nearly 4% of their net income. Which Nick might want to think about, given he says he’s determined to make work pay.
Secondly, if you have children you are stuffed. That is the technical term I believe. And figures 4.2 and 4,3 illustrate it beautifully. Families with children in income groups 5 or above will be hit harder than any other groups – pensioners, low wage earners, non workers – by the pre Budget announcements. But the reforms announced in the budget will take more income away from families with children in the poorest group, and all the way up to group 7, than for other households. Thus, you can see how those in groups 5 – 7, the middle income earners, will be whammied twice. The burd probably falls into this category. With an 18 year old about to enter further education, and a 7 year old with a long way to go before he qualifies for a paper round, I, and many like me, are going to have to get by on a lot less money in the next four years. I’m thrilled.
So, if you haven’t yet been blessed with the pitter patter of tiny feet and are contemplating starting a family, you might want to hold that thought. I’d postpone any rash decisions until at least 2014. Giving the IFS plenty of time to educate the ConDem government on the difference between regressive and progressive reform measures.