Nick Clegg insists Budget cuts are fair

Deputy Prime Minister Nick Clegg yesterday insisted the Government was committed to fairness despite a respected economic think-tank concluding the Budget hit the poorest hardest.

Mr Clegg said the Institute for Fiscal Studies (IFS) analysis was “partial” and did not account for efforts to get people off benefits and into work or future plans to make the tax system fairer.

The IFS study found that the poorest six-tenths of households lost more in cash terms as a result of the Budget’s tax and welfare changes than wealthier households in all but the richest 10 per cent.

But Mr Clegg said: “This IFS analysis is by definition partial. It does not include the things we want to do to get people off benefits and into work.

“If you just look at who is receiving benefits then in a sense you don’t ask the most important question of all, which is how you can relieve poverty and make Britain fairer by getting people off benefits and into work.”

Mr Clegg said the Government’s plans also included a pupil premium to improve the education opportunities for poorer children and further changes to the tax system.

“That is a plan for real fairness, that is progressive. And I think that is a richer understanding of what fairness is about than a single snapshot that simply doesn’t provide the full picture of what we are trying to do over the coming months and years,” he said.

The report said Chancellor George Osborne’s tax and benefit changes between June 2010 and April 2014 will cost the poorest 10 per cent of households £422.83 a year.

But those in the second richest 10 per cent would only find themselves £339.12 worse off.

The IFS analysis showed that the overall effect of the new reforms announced in the June 2010 Budget is “regressive” – hitting the poorer more than the rich – but the tax and benefit reforms announced by the previous government for introduction between June 2010 and April 2014 were 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.

“Those who lose the least are households of working age without children in the upper half of the income distribution.

“This is because they do not lose out from cuts in welfare spending and are the biggest beneficiaries from the increase in the income tax personal allowance.”

Shadow chancellor Alistair Darling accused Mr Clegg, who is holding the fort in Downing Street, of providing political cover for an “old-fashioned Tory Budget”.

He said: “Today there’s con­clusive evidence that far from being fair, the coalition has hit the poorest hardest, especially those with children.

“While Nick Clegg is in charge he would do well to ask himself what he thinks he’s doing providing cover for this old-fashioned Tory Budget.”

Labour leadership hopeful David Miliband said: “This report reveals George Osborne’s Budget was soft on the banks, hard on the poor.

“It gives the lie to the coalition’s claims that this Budget was progressive.”

In another potential difficulty for the Government, the Equality and Human Rights Commission (EHRC) said it was unclear whether the Treasury met a legal obligation to assess the impact of the Budget on vulnerable groups.

It has been pressing ministers and officials since June and is considering whether it needs totake enforcement action under legislation introduced by Labour.