by Daphne Liddle

THE INSTITUTE for Fiscal Studies (IFS), a leading and respected economic think tank, last week issued its analysis of George Osborne’s emergency Budget and concluded unequivocally that it will take more from poorer households than the rich and is therefore a regressive budget.

The IFS report shows that families in the lowest 10 per cent of annual income will have their income reduced by more than five per cent by the year 2014 as a result of increases in VAT, cuts in benefits and other measures.

This totally refutes the claims that George Osborne made at the time that the Budget was fair and the rich would pay proportionately more than the poor.

Nevertheless Osborne is still trying to claim this and accuses the IFS of ignoring aspects of the budget that are supposed to be aimed at getting more people into work and stimulating industry.

This is rubbish; the budget will seriously increase unemployment, especially in the public sector, throwing many more families to the bottom of the economic ladder and making it harder for those already there to find jobs.

The new study, part-funded by the End Child Poverty campaign, reflects 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.”

The impact will be five times greater for these households than for richer couples who do not have children, the report said. This is because the poor will bear the brunt of cuts to the welfare budget such as changes to housing benefit and child tax credits and will also be hit by the increase in VAT from 17.5 per cent to 20 per cent.

The report also questioned the Government’s decision to use the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) when calculating certain benefits.

The public sector union Unison was quick to respond; general secretary Dave Prentis said: “There is no compassion in this coalition. The Chancellor’s claims that his budget was fair and progressive have been blown out of the water. Well he didn’t fool us then and he’s not fooling anyone now. That is why Unison is stepping up its campaign to protect the vital public services that the vulnerable and needy rely on most, ahead of the Comprehensive Spending Review.

“The Tories always revert to type. They are still the party that clobbers those on the lowest incomes, whilst helping the rich to get richer. It is a disgrace that children from low-income families are the ones paying the price for this bankers’ recession.

“Unison has long been warning that the Tories plans would hit the poor hardest. Many families are already struggling to cope with the fall out from the recession, and things will only get worse.

“The Comprehensive Spending Review will pile more misery onto families, with more local communities set to lose vital services. The cost of everyday essentials such as fuel and food are already rising, with inflation and VAT hikes in the pipeline. This spells danger for low-income families, who spend the lion’s share of their money on everyday essentials.”

We hope this means that Unison will stand by its proposals to the coming TUC congress for an autumn of protest marches, strikes and other measures against the proposed cuts and that it will play a leading role in fighting this class battle.

Shadow Foreign Secretary and Labour leadership candidate David Miliband accused the Government of being “soft on the banks, hard on the poor”.

He told the media: “You don’t quarrel with the IFS; they are the most respected source of information.”

Yvette Cooper, the Shadow Work and Pensions Secretary, said Osborne’s budget amounted to 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,” she added.