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Economics experts clash over effects of slashing spending

The Institute for Fiscal Studies has slammed the Conservative-LibDem Government’s £81bn package of cuts, labelling it as “regressive”.

Chancellor George Osborne told the House of Commons last week that the coalition Government’s comprehensive spending review’s measures would ensure those with the “broadest shoulders” bear the brunt of the pain.

But the IFS acting director Carl Emmerson says he disagrees with the Government’s repeated assertion that the CSR is progressive.
He says: “Our analysis, which was published in August, shows that including a wider set of benefit reforms announced by this Government leads to the conclusion that the impact of all tax and benefit measures yet to come in reduces the incomes of lower-income households by more than that of highe-income households, with the notable exception of the richest 2 per cent of the population who are the hardest hit.
“Therefore, the tax and benefit changes are regressive rather than progressive across the income distribution. And when we add in the new measures announced on Wednesday, this finding is, unsurprisingly, reinforced.”

But the Organisation for Economic Co-operation and Development welcomed Osborne’s spending review, calling it “courageous” and “a necessary step towards achieving long-term fiscal stability”.

OECD secretary general Angel Gurrìa says: “Budgetary consolidation is never easy but the timing and scope of the measures balance concerns for near-term growth with the need to stop the snowballing of debt and preserve credibility.

“The measures are tough, necessary and courageous. Acting decisively now is the best way to secure better public finances and bolster future growth.”


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