Thursday, October 21, 2010

Glad I didn't vote Lib Dem

The Institute for Fiscal Studies has made its first assessment of the Spending Review, concluding that it was broadly regressive, with the exception that the top 2% of the income distribution will end up contributing the highest proportion of their income of any group. However, it is worth pointing out that the main reason the top 2% contribute more is that Labour introduced measures, chiefly the 50% tax rate, which the Con-Lib coalition has not removed.

In sum, the IFS shows that the best guess for the distributional impact of the spending cuts and tax changes is that they will affect families proportionally more as we go down the income scale (indeed, it is hard to imagine how any deficit reduction plan based chiefly on spending cuts could do any different).

What is a little alarming is the aggressive nature of the government's response to this assessment by a respected, non-partisan body. Clegg called it 'distorted nonsense' and claimed, rather tenuously, that the IFS was failing to take into account the progressive effects of policies such as the 'pupil premium'.

Odd that a government whose policies are informed by the view that throwing money at a problem doesn't work should imagine that a redistribution of a couple of billion to schools in poorer areas will counteract the effect of the various benefit cuts announced yesterday. After all, hadn't Labour got us into this mess by its misguided profligacy in the name of social engineering? Similarly misleading comments came from Cameron, who claimed the budget was progressive because people paid a greater proportion in tax as you move up the income scale. Sure, unless he was thinking of cutting higher rate tax to 20%. The argument is not that the tax and benefit system is not progressive at all, it's an argument about how much more or less progressive you make it.

Yet another example of double-speak is the bizarre accusation (in Osborne's speech) that Labour is at once a party of 'deficit-deniers' who would not cut the deficit, and at the same time a party whose plans would have meant greater spending cuts than the current government is proposing. How exactly does that work?

My guess is that the only way to push through such brutal medicine is to launch a campaign of mass disinformation. Something tells me they might be getting some assistance on that: Rupert Murdoch has come out in praise of the coalition, arguing amongst other things that 'the financial crisis must not be used as an excuse by governments to roll back economic freedom'.

Chance would be a fine thing.