Budget: the pressure is on for the ‘progressive’ coalition

IFS analysis of the emergency budget suggests that it is “somewhat regressive” when you “take out the effect of measures inherited from Labour, 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.”

Factor in on top of that the serious pressure on the DWP to come up with big additional cuts in welfare payments to reduce the pain on other departmental budgets and keeping things “progressive”, living up to the boasts, making the graphs much pointed to by Lib Dem MPs a reality in a five-year retrenchment that leans heavily on cuts over tax hikes… and you see how difficult it will be to secure and hold the progressive mantle through this saga ahead.

Though the IFS does have comfort for those Lib Dem modernisers who are busily trying to convince their fellow MPs that the party’s election line that VAT is regressive is wrong. The IFS says it is progressive if you look at groups by spending not income.

The IFS says George Osborne’s line that he had to raise VAT because Labour’s black hole is bigger than expected is a bit bogus (my phrase). They needed it for some tax giveaways they chose to make. It was more in line with the traditional Conservative (and economic liberal) approach that likes to shift from direct to indirect taxes.

The IFS fox has been slightly shot, winged maybe, by the greater candour in numbers from the coalition, but their analysis of distribution is a significant new addition to the political debate.  And that’s before the effect on public services is factored in to distributional effects of government action.