IFS view of the cuts

The cut in central government public services spending as a share of national income now planned by the Coalition will more than reverse the entire increase we saw under Labour. We are looking at the longest, deepest sustained period of cuts to public services spending at least since World War II.

On the tax side, yesterday’s package added up to an £8 billion net tax increase in 2014–15, but this comprised roughly £20 billion of tax increases offset by roughly £12 billion of tax cuts. When Mr Osborne said that “the years of debt and spending” made the £13 billion increase in VAT unavoidable you might just as well say it was his desire to cut other taxes that made it so.

Turning to the distributional impact of the Budget, Mr Osborne and Mr Clegg have been keen to describe yesterday’s measures as “progressive” in the sense that the rich will feel more pain than the poor. That is a debateable claim...

The Budget looks ... somewhat regressive – when you take out the effect of measures that were inherited from the previous Government, when you look further into the future than 2012–13 and when you include some other measures that the Treasury has chosen not to model... [P]erhaps the most important omission in any distributional analysis of this sort is the impact of the looming cuts to public services, which are likely to hit poorer households significantly harder than richer households.