22 Oct 2010

Spending review: Clegg attacks “nonsense” IFS warning

Nick Clegg has rejected a leading think tank’s claims that families would be hit hardest by the government’s “regressive” spending review.

The Deputy Prime Minister said the Government “fundamentally” disagreed with the Institute for Fiscal Studies’ claims that the government had not distributed the spending cuts “fairly”.

In an interview with The Guardian, Mr Clegg accused the IFS of “frightening people”, saying it had “airbrushed” the facts in saying the £81 billion of cuts would hit the poorest families hardest.

“We just fundamentally disagree with the IFS…It goes back to a culture where fairness was seen through one prism and one prism only.” Nick Clegg, Deputy Prime Minister

“We just fundamentally disagree with the IFS.

“It goes back to a culture of how you measure fairness that took root under Gordon Brown’s time, where fairness was seen through one prism and one prism only which was the tax and benefits system.

“It is a complete nonsense to apply that measure, which is a slightly desiccated Treasury measure. People do not live only on the basis of the benefits they receive.

“They also depend on public services, such as childcare and social care. All of those things have been airbrushed out of the picture by the IFS.”

The IFS yesterday insisted the austerity measures unveiled by Chancellor George Osborne would see families with children lose out.

“The tax and benefit changes are regressive rather than progressive across most of the income distribution. And when we add in the new measures announced yesterday this finding is, unsurprisingly, reinforced,” said the acting IFS director Carl Emmerson.

IFS analyst James Browne added: “Overall families with children seem to be the biggest losers.”

Even with the flagship Pupil Premium…60 per cent of primary school children and 87 per cent of secondary school pupils will be in schools where real funding falls. IFS report

Mr Emmerson said that while the richest two per cent were hardest hit, this was due to tax increases already announced by the previous Chancellor Alistair Darling. But even then the Treasury analysis “excludes some measures that we think it is possible to make a rough estimate for”, including housing benefit and council tax benefit, which are likely to affect the poor more.

The IFS analysis found that overall the cuts in public service spending would be the deepest since the six years starting in April 1976.

But the Organisation for Economic Cooperation and Development (OECD) backed the government’s spending review, describing it as “tough, necessary and courageous”.

OECD Secretary General Angel Gurria said: “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 to 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.”

His comments were a boost for Mr Osborne and will help him counter claims that the spending cuts risk choking off growth and sending the economy into recession again.

A pot pourri of stealth cuts?
It is rather difficult to escape the notion that in an almost crazed desire to be seen as "fair", the Coalition has made a bit of a dog's dinner of the spending review, writes Faisal Islam.

Even if you support the extent and pace of deficit reduction mapped out by George Osborne (which it should be said has undoubtedly taken Britain out of credit rating danger zone), a litany of half-truths, dodgy claims, and policy inconsistencies was today exposed by the IFS.

And rarely can there have been such a direct Downing Street intervention in to the heart of the "post match" IFS briefing that has become a fixture of Budgets and Spending Reviews in the last decade.

Read more from Faisal Islam's blog

Q&A session
Mr Clegg yesterday faced a public grilling alongside Prime Minister David Cameron in Nottingham, where they were accused of “picking on the weakest people in society”.

The Lib Dem leader told a voter he stood by the spending review, which was the “fairest” way to help Britain clear its deficit.

“I honestly would not have advocated this if I didn’t feel that, notwithstanding all the difficulties, we tried to do this as fairly as possible,” said Mr Clegg.

“Of course I understand people are very, very fearful, and fear is a very powerful emotion and it kind of sweeps everything else aside.

“But I would ask people to have a little bit of perspective: if you look at some of the announcements we made yesterday, and add that to some of the announcements we made in the Budget, I think the picture is a little bit more balanced than people are saying.”