Apparently Osborne’s austerity program of “shared sacrifice” in the UK is not being greeted passively. From this morning’s Guardian:
George Osborne’s austerity programme will cut the living standards of Britain’s families by more than 10% over the next three years as those on the lowest incomes suffer most from the tax increases and spending cuts designed to reduce the budget deficit.
A study from the Institute for Fiscal Studies, the UK’s leading experts on the public finances, concludes that the chancellor’s strategy will result in greater inequality and rising child poverty, throwing into reverse progress made in the final years of the last Labour government.
The IFS analysts (full report, which I have not read, is here) examined the likely impact of the program on each decile of the population, and found that:
The IFS said the poorest families also lose more as a result of the squeeze on public spending. “Losses as a percentage of net income (plus the value of benefits in kind) are between 5% and 6% at the bottom of the distribution, which is similar to the magnitude of the losses for those on the lowest incomes from tax and benefit reforms.”
Osborne has said that the pain caused by deficit reduction will be shared, but the IFS study found that the richest 10% of households will see income cut by just over 4% on average between 2011 and 2014 by tax and benefit changes.
The thinktank said the losses among this decile would be concentrated among the highest 1% of earners, due to the increase in the top rate of income tax to 50% for those earning more than £150,000, and the withdrawal of the personal income tax allowance and less generous pension relief for those earning more than £100,000. (emphasis added)
If I am reading the oddly worded highlighted sentence correctly, the poorest are likely to lose up to 12% of their income, while those in the very top 1% are likely to lose a measly 4%. Even those numbers don’t capture the gross disparity, since the losses at the bottom end are likely to come directly out of spending for necessities while those at the top will simply buy fewer toys.
So Osborne fails both on equity and (if recent GDP data are any indication) on efficiency or growth. Heckuva job, George.