Jeff Salway: Now Osborne's progressive credentials under attack

THE Institute for Fiscal Studies (IFS) has merely confirmed what was already obvious - that this government's approach to slashing the deficit is anything but progressive.

Its latest report, published yesterday, found that while every income group will be affected by the measures outlined in June's emergency Budget, households with the lowest incomes will suffer disproportionately as the government takes its sharpened axe to the benefits system. No surprise there, yet the government continues to claim its measures are progressive, equal and fair.

The analysis produced by the IFS has in recent years become indispensable for politicians, academics, economists and journalists, with previous prime minister Gordon Brown - who suffered at the hand of the IFS more than most - describing it as a British institution and Jonathan Dimbleby suggesting that "all the political parties treat the IFS as if it were the Bible".

The IFS has over the past three years provided the Conservatives with ample ammunition with which to attack the Labour government's fiscal policies, and George Osborne, the Chancellor of the Exchequer, has taken advantage more than anyone else. As recently as the March Budget, he declared that he would wait for the IFS analysis of then chancellor Alistair Darling's measures before making a full response - to Osborne, the IFS verdict was the one that mattered most. On several occasions he has sought to give credibility to IFS criticism of Labour policies by stressing how respected the institute's work was.

Now the boot is on the other foot - and Osborne has decided, suddenly, that he can afford to "not accept" the institute's latest analysis, which the government has criticised as selective and insufficiently robust.

The IFS, while supporting the broader aim of reducing the deficit and curbing public spending, has expressed its reservations about Osborne's Budget before. Its immediate response to the June announcement was to challenge the new government's claim to be progressive. It said the emergency package hit the poorest hardest, a verdict it has now strengthened after further analysis that studied the June package in isolation from previous Budgets that had a bigger impact on higher earners.

The measures outlined in June will hit the poorest families with children more than any other group - they will lose over 5 per cent of their income, against the 1 per cent loss suffered by higher earning non-pensioner households without children, the latest research suggests. The Budget will take more than twice the income from the poorest households as a share of their annual incomes than from the second-richest group, which has four times as much income a year after tax, the report adds. This from a government that not only claims to be progressive but has committed to ending child poverty within a decade. In contrast the Labour plans for 2010-14 would have seen the richest 10 per cent of households bearing the brunt of the cuts, according to the IFS.

Yet in his Budget, Osborne claimed that, while everyone would be affected by his fiscal measures, those at the bottom of the income scale would pay proportionately less than those at the top. His colleague Danny Alexander sought to ram home the misleading message, claiming the Budget was progressive because "the burden falls most heavily on the wealthier in our society".

Patently not true. The IFS research published yesterday confirmed what organisations from Citizens Advice to the End Child Poverty campaign have been warning for some time - the emergency Budget will harm the most vulnerable in society the most.

And all this before the October spending review, which promises to tread the same regressive line. Perhaps by then the government will admit that its policies are more regressive than progressive, but for now it continues to do anything but, choosing instead to dismiss the IFS. At a time when groups that previously had supported the more aggressive line to cutting the deficit being set out by the Tories are expressing fears that its policies could cause a douple-dip recession, the independent work produced by the likes of the IFS and National Institute of Economic and Social Research is crucial in exposing the government's fiscal fault lines. Osborne may suddenly seek to discredit the IFS, but I know who most people will set their stall by.