25 August 2010

IFS Study Shows What Won't Happen

What matters most in politics - How the decisions made will affect people? Or which parties happen to have announced which policies? If you're the IFS, it seems you think the latter matters more.
The IFS have taken the government's Emergency Budget from June in isolation and shown that the policies announced in it will have a regressive effect on their own.

However, the public won't simply be affected by the June Budget. The previous government also held a Budget just a few months earlier in March. This has two implications:

1. The policy decisions from June weren't made in a vacuum - they were adding upon policies that had just been announced in March. The June Budget did not reverse any of the March Budget, with the one exception of cancelling Cider Duty rises.

2. The impact on people's livelihoods will be total effect of both March's and June's Budgets. The IFS have ignored the impact of March's Budget and only reported on the impact of June's. This is not what is going actually happen to people.

So while this is of little economic relevance, it is more arguably of political relevance. It may tell us about the values of the new coalition government (albeit in a very limited way - see point 1 above). I hope the IFS realises it is engaging in a primarily political debate rather than an economic one.

Worse, by choosing to present the statistics in this way, it is providing ammunition for Labour to use against the Tories and Lib Dems. Given the IFS prides itself on its neutrality, this is a rather surprising decision.

UPDATE 11am: The IFS's report does contain the correct graph that includes the effect of all tax and benefit changes. This is the one that we should be focussed on.

Let me be clear - this is still a regressive picture, and it is not a graph I can take any joy from. It still shows that some of the poorest households will be among the hardest hit. Sadly that is just the nature of benefit cuts - cuts that would have been made whoever was in power. However it does appear that some of the more wealthy, particularly in deciles 7, 8 and 9, will not be feeling their fair share of the pain.

I have redacted my last criticism of the IFS. The full report is far more balanced than I gave the IFS credit for. It is End Child Poverty who have chosen to highlight the misleading graph.


Sunder Katwala said...

The political consequence is that - because Labour made progressive choices in its final budget, the Coalition was able to make sharply regressive decisions and hope these were mitigated by those of its predecessor. (It wasn't, in fact, quite enough, even if you are allowed to say the distinction between Labour and Coalition announcements is irrelevant). The alternative if the rhetoric was (as I would hope) sincere was to make progressive choices of its own, not to offset earlier progressive choices with regressive ones, in the hope it would come out about even. And you haven't got the distributional impact of spending choices in yet either, so the Coalition is a long way short of its own (laudable) rhetoric on distributional fairness.

So the IFS report is robust and evidence-based, and those who commission it have no editorial control over the findings. (in this case, the End Child Poverty coalition, whose objectives the Tories and LibDems both share and support along with Labour). The IFS can show it has always been ready to have a ding-dong with every party when the numbers merit it - such as over Gordon's £35 billion cuts claim in 2005 general election, which was an enormously political row where the IFS case strengthened the Tory riposte.

In this case the Chancellor and Deputy PM made evidence-based claims based on a Red Book table that was clearly selective and so misleading. Given the nature of how the table was proferred as "proof", the IFS has to comment on that when they produce their own post-budget briefing and analysis.

And eg you miss that part of the divergence is the omission of the budget's benefit changes from the Coalition's table, and the claim not to be able to foresee the post-2011 impact.

John said...

Define `progressive` - Labour seem to be making two mistakes:

1. Thinking that economics is static - for instance is it really an attack on the poorest to ask those receiving housing benefit to not receive more than £1000 a week? It's not really an indicator is it - unless progressivism is really tied to neocommunism

2. Assuming that indicators are static - the real proof will be in 5-10 years time and we'll see if employment and living standards rise due to the pain right now

3.Labour need to produce an alternative budget that can be judged not only against these IFS measures but also taking into account growth and jobs that can then be judged annually.

If the coalition are being deeply transparent regarding the impacts of their own budgets - when Labour elect a new leader let them show what they can do instead.

People are not that stupid - the role of opposition has changed. No longer do floating voters expect it simply to be about opposition for its own sake. Labour need costed plans that add up.

Willy Wonk said...

Did you read the IFS report? From page 5: "The pre-announced direct tax and benefit changes to be in place by April 2012 are a progressive overall tax rise that will particularly affect the richest tenth of households."

LibDemKitty said...

If this report isn't reason to adopt Lib Dem policy on getting rid of universal benefits, with a bit of extra cash then aimed at the poorest/disabled, then I don't know what is. Cameron has the perfect "excuse" for breaking his reckless pledge - it was #nickcleggsfault ;)

dazmando said...

Duncan I agree with you http://bracknellblog.blogspot.com/2010/08/blogger-ifs-confusion-and-my-confusion.html but I do think we need to improve

Nathan said...

well who ever takes political blame for this is one matter, but the fact that major childrens services are being cancelled is a real worry. I feel the government should do more to encourage private sector investment, as what is the point of individuals having a huge personal wealth when a large number of people can not find a job in their area that pays a wage to cover basic living costs.

Malcolm Todd said...

I'm not hugely impressed by the claim that this government can take the credit for not reversing the last government's budget and say that makes us progressive. At the very best, you'd have to admit that Osborne's budget is less progressive than Darling's, don't you think?

Which brings me to John's comment:
"3.Labour need to produce an alternative budget that can be judged not only against these IFS measures but also taking into account growth and jobs that can then be judged annually."

Er - Labour did produce an "alternative" budget. In March, when they were in government. That is precisely what the IFS has compared Osborne's budget with, which Duncan seems to think is so unfair!

Joe Otten said...

Labour's April budget was pure fantasy and cynical electioneering. It deserves no credit whatever it said. Labour must be judged on its record in government not its record of electioneering.

A death-bed conversion to fairer taxes from the party that doubled tax for 10p rate payers, and allowed hedge fund managers to pay less than their cleaners? You've got to be kidding.

No, that budget existed purely to give Labour this headline. Well done chaps. Now grow up.