Independent financial think-tank, the Institute of Fiscal Studies, has today said that the latest UK budget is ‘very clearly regressive’, impacting more heavily on the poor than the wealthy.
The IFS has suggested that the measures in the budget will cost £422 for the poorest 10% of families over the course of the next 4 years, after a combination of tax rises and public sector and welfare cuts begin to take their toll. However, it was also concluded that Labour budget proposals would be similarly regressive, based on plans put forward by Alistair Darling during the last budget report.
The IFS’s findings have today been backed by senior research economist James Browne, who suggested 20% VAT and 25% public sector cuts would inevitably affect the poorer most.
However, the coalition government has fiercely rebuked suggestions of the budget’s regressiveness, claiming that the IFS has failed to account for the impact of economic growth measures in improving the employment prospects and wealth of the lowest income percentiles of the population.
Going further, Financial Secretary to the Treasury Mark Hoban said the budget was in fact progressive, and the impact of the economic and employment stimulus measures would help reduce the impact of the changes in the budget on the poorest families.
Chancellor George Osbourne’s first budget was announced on 22nd June, and included widespread public sector cuts, pay freezes and tax hikes, aimed at shoring up the UK’s national finances.