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Budget: 'hard to protect poorest and cut deficit'

By Channel 4 News

Updated on 25 August 2010

As the Institute for Fiscal Studies claims the coalition's budget will hit the poor hardest, former Labour Downing Street policy chief Matthew Taylor tells Channel 4 News it it is hard to cut public expenditure without having a bigger impact on low earners.

Budget: 'very hard' to make cuts without hitting the poor

It is very hard to reduce public expenditure without impacting more on the poor than the well-off.

And here's why. Last November, the RSA/2020 Public Service Trust published a pamphlet called "The Fiscal Landscape: understanding contributions and benefits".  

The top lines of this report were that:

So it's hard. It is even harder when – as the coalition has – you have made a blanket guarantee to protect the income levels of all pensioners.

And there is another factor too. If the government were, say, to reduce the value of free health care to a rich family through cuts to the NHS, this would represent a very small proportion of its family income.

But the same cut would represent a much bigger proportionate reduction in the social income of a low income family.

Putting to one side the debate about the June budget, George Osborne will face a difficult choice in the October spending review. Either he genuinely makes the package progressive in its impact - which will mean hammering middle class entitlements - or he accepts that a cuts package is bound to be regressive - which threatens the coalition’s centrist credentials.

The classic case in point is the proposed pupil premium which is intended to direct more funds to the poorest pupils.

There are already several mechanisms in place which ensure poorer pupils have more money spent on them so the premium will have to do more redistributive work than the existing framework. But if overall pupil funding is flat this either means a generous premium – which will have to involve taking money away from better off pupils – or a small premium – which will be insufficient to compensate for the overall regressive impact of a cuts package.

This is very hard stuff. The coalition needs to be clear in its aims, its policies and its message (a hesitant spokesman for the Treasury had at least three competing defences on the Today programme this morning).

But whilst sympathising with the chancellor's dilemma, there are two things I would advise the coalition against strongly: don't over-claim at budget or spending review time (something which dealt a heavy blow to Gordon Brown's credibility), and don't slag off the IFS (which is highly respected for its rigor and objectivity).

Matthew Taylor is chief executive of the Royal Society of Arts (RSA) and former chief adviser on political strategy to Tony Blair.

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