Deputy Prime Minister Nick Clegg has attacked the Institute of Fiscal Studies’ Budget analysis claiming it fails to take into account other Government policy initiatives.
In a column in today’s Financial Times, Clegg says the study ignored the capital gains tax increases for higher-rate tax payers and measured the Budget’s impact “solely on the basis of how much money people could be receiving from and giving to the state at a single moment”.
Yesterday’s IFS report said “the tax and benefit changes announced in the emergency budget are clearly regressive” hitting “the poorest households more than those in the upper-middle of income distribution”.
Clegg says this distributional analysis only tells part of the story with a couple receiving an extra £5 a week representing fairness “in the language of the IFS”, but that if “the government helps that couple find work” and they have a shared income of £20,000 the fact this couples lives are better off “disappears from the statistics”.
He adds that over time, coalition policy “will help the economy to grow and create opportunities that would be destroyed if we allowed borrowing to continue unchecked”.
IFS senior research economist for direct tax and welfare James Browne says the £825m raised annually by CGT rise is “probably not enough to significantly alter our conclusions”.
He says Clegg writes about “fairness whereas what we have been talking about is progressivity, whether the richest or the poorest lose most as a percentage of income”.