Coalition claims that the spending review was fair were dealt a heavy blow today when a leading economics think-tank insisted the cuts would hit the poorest harder than most of the better off.
The respected Institute for Fiscal Studies (IFS) warned that Chancellor George Osborne’s £81 billion cuts package was “regressive” except for its impact on the richest two per cent.
Families with children would be the biggest losers, it said.
The intervention came as David Cameron and Nick Clegg met voters together in a bid to sell the deficit reduction measures to the public.
Without naming the IFS in particular, Deputy Prime Minister Mr Clegg accused the Government’s critics of “frightening people” with claims that they were “doing unfair things when we are not”.
But he also appeared to acknowledge that the Government’s claims that the rich would pay the most were based on tax changes introduced by the former Labour government.
In its analysis of the spending review, the IFS said the changes announced yesterday would reinforce the “regressive” nature of the Government’s plans to tackle the deficit, including the £7 billion of welfare cuts.
“The tax and benefit changes are regressive rather than progressive across most of the income distribution. And when we add in the new measures announced yesterday this is, unsurprisingly, reinforced,” said IFS acting director Carl Emmerson.
“Our analysis continues to show that, with the notable exception of the richest two per cent, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way.”
IFS analyst James Browne added: “Overall, families with children seem to be the biggest losers.”
He said that while the Treasury had claimed the overall package was “progressive” - as a result of measures previously announced by former chancellor Alistair Darling - it had ignored a third of the welfare changes.
“The poorest are losing more as a proportion of their income as a result of these changes,” he said.
The IFS also challenged Mr Osborne’s claim that the Government’s cuts to those departments whose budgets were not protected averaged 19 per cent compared with 20 per cent implied by Labour’s plans.
It said Mr Osborne’s figures failed to take into account the £6 billion of cuts already announced by the Government this year, while the actual figure under Labour would have been sixteen per cent.
Mr Clegg accused critics of “frightening” the public by unfairly focusing only on the announcements – such as huge benefit cuts –unveiled in the spending review.
“People who are trying to take only one bit of the equation and say ‘ah, that shows it is all very unfair’ – they are not being very straight with people and frankly they are frightening people and that is not right, frightening people and claiming we are doing unfair things when we are not,” he said.