The ‘progressive’ debate re-opens

Busy times indeed for the numbercrunchers and policy wonks. I’m at what is, in effect, the Institute for Fiscal Studies’ third post-Budget briefing of the year: one for Darling’s final Budget, one for the Emergency Budget and one, now, for the Spending Review. We’re half-way through, but we’ve already been served a hefty chunk of meat: the IFS’s analysis of what yesterday’s Spending Review meant for public spending and for welfare.

So far, there are mixed tidings for the coalition. The IFS’s acting director Carl Emmerson – who is filling in now that Robert Chote has departed for the OBR – set the tone with his opening remarks. “By 2015,” he pointed out, “departmental spending will be lower under this government than it would have been under Labour”. He went to say that it is “laudable” that the government is trying to model the distributional effects of its policies – but that, on the evidence of only tax and benefit changes, the Spending Review is “regressive”. Little surprise that we’re hearing that word, given the narrow measurement that’s being used.

As for particulars, there were many of the numbers that we heard yesterday. The overall fiscal tightening is about £2 billion lower than it was in the Budget, thanks to a £2 billion increase in spending paid for by borrowing. 73 percent of the tightening will come from spending cuts, the other 27 percent from tax measures. International development is the biggest departmental “winner,” with a budget rise of over 34 percent. Communities is the biggest “loser”, with a drop of over 67 percent. The average departmental cut is 13 percent, compared to the 11 percent encoded into Labour’s figures in the March Budget.

On welfare, the IFS summarised the coalition’s child benefit and tax credit measures thus: “Overall, poorest families with children will gain and some working families will lose out.” Adding that: “This reduces the incentives for families with children to work.” As at the last Budget, then, we are seeing how good intentions can be counterproductive, and potentially work against the thinking behind IDS’s Universal Credit. In this case, though, I doubt the effect is that great.

There’s plenty more to get through. But it’s worth highlighting one of the final points in the IFS’s welfare presentation: that the retention of universal benefits such as Winter Fuel Allowance undermines the government’s argument on child benefit (that low income earners shouldn’t subsidise high income earners). You don’t need an economist to tell you that, but it will be interesting to see how this plays into the wider debate over universal benefits. More dispatches from Wonk Central shortly.