False Economy ran from 2010-2015. This site is no longer being updated, but the False Economy research team continue to report at Sentinel News.
Skip navigation

The wrong cure

How cuts will make Britain more unfair

The government says that its cuts programme is not just unavoidable, but also fair and progressive. Is this true?

You can argue about the meaning of fair, but progressive has a definition. If what the government is doing is progressive it would take from the rich and give to the poor (or at least hit them much less than the rich).

Independent experts say the cuts are not progressive.

Let's first look at the changes in tax and benefits, and then at the impact of cuts in services.

Tax and benefits

Whether changes in tax and benefits are progressive is relatively easy to measure as these are flows of cash.

The Institute of Fiscal Studies is well respected as an independent analyst. It says that the government's claim that the tax and benefit changes in the budget and spending review are progressive is wrong.

This graph is from their analysis of George Osborne's first budget:

June 2010 Budget: Effect of tax and benefit reforms by income decile

It shows the biggest losers are the poorest 10 per cent of families with children.

The IFS also had this to say about October's spending review:

Our analysis (of the budget) shows that ... the impact of all tax and benefit measures yet to come reduces the incomes of lower income households by more than that of higher income households, with the notable exception of the richest 2% of the population who are the hardest hit. Therefore 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. So our analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way.

This is the IFS analysis of all government policies on tax and benefit by 2015. The poorest lose the most. It is only the impact of the previous government's tax increases for the wealthy that make the top ten per cent bigger losers than some of those who are poorer.

Impact by 2015-15 of government policies

Spending cuts

Working out the impact of the cuts in spending on services is harder. Some parts of public spending benefit all of us – such as many environmental protection measures.

But other parts of public spending do benefit some people more than others. To give a simple example the richer you are, the less likely that you use the bus.

Researchers for the TUC trawled official statistics to gather information about how different income groups benefit from public spending. With these figures, and by assuming that everyone benefits equally from spending like environmental protection and defence, they were able to work out whether the cuts were progressive.

This chart shows the value of the services lost as a proportion of household income.

Value of services lost by percentage of household income

Again the impact of the cuts is much harder on the poor and those in the middle than it is on the rich. The poorest ten per cent suffer 15 times more than the richest.

The impact on women

The Womens' Budget Group is a group of independent experts who have been working with the Treasury to analyse the effect of economic policies on women.

This is what they said about the impact of the Spending Review:

Next: What the experts say »


Quick fact

The poorest ten per cent will suffer 15 times more than the richest

Cuts are not the cure
Download a printable pdf summary of this section.
Play video: Why cuts are the wrong cure
VIDEO: Why cuts are the wrong cure