I can’t help but feel a little sorry for the Lib Dems. After years – nay, decades – in the political wilderness, they suddenly find themselves grappling with all the problems of government. We have witnessed some odd scenes as a result, such as the Business Secretary recently castigating capitalism
(although rumour has it he then phoned Richard Lambert, the head of the CBI, to claim he’d been misreported). Lib Dem MPs who campaigned against tuition fees, and were elected on that basis, now have to vote higher fees through in parliament – even before they run the risk of cutting housing benefit so sharply that many families may end up on the street. I suspect this is not what they entered politics for.
These challenges have been thrown into sharp relief by the recent squabble over the Comprehensive Spending Review (CSR) – and, in particular, the claim from the Institute of Fiscal Studies (IFS) that the policies therein were regressive. This means that the IFS thinks the policies in the CSR took more money away from the poorest people in the country than they took away from the richest.
Cue Nick Clegg, social anthropologist and seasoned MP – well, he joined the commons in 2005, and was an MEP before that – and, of course, Deputy Prime Minister. Despite continuing the recent trend of the Tories wheeling out a Lib Dem minister to deal with a difficult story – what are junior coalition partners for, after all? – Clegg’s attack on the IFS has raised a few eyebrows.
It is one thing for a politician to challenge a think-tank’s logic or analysis. But it is quite another for a relatively untried and economically uneducated individual to take on what is, basically, the most respected and non-partisan economic think tank in the UK (with an honourable nod to NIESR). Like the Congressional Budget Office in the US – although the funding is different – the IFS very obviously does not take sides in political debates. It has unrivalled expertise in analysing the public finances, to the extent that old friends of mine in the Treasury used to dread the IFS analysis, and green book, more than the usual Commons sideshow when the Budget was presented.
The IFS is also, of course, right. The Treasury’s own analysis of the CSR doesn’t take account of all the benefit changes that are planned, or even go up to FY14/15, the final year of the Spending Review. And with so many unambiguously regressive measures delayed until later in the life of the current parliament, the Treasury has clearly fudged the numbers – you cannot omit the impact of changes to the likes of housing benefit, employment and support allowance, and council tax benefit, and still expect your analysis to be taken seriously. The IFS, thankfully, is above such things, and has pointed out the true nature of the burden-sharing. Clegg has been sold a kipper.
Where I do feel sorry for the Deputy PM is that we should all have expected the CSR to be regressive. It clearly does not play well for politicians to say so, but as soon as the coalition decided to close the deficit primarily through spending cuts, rather than tax rises, the deficit reduction plan was always likely to hit the poorest hardest. Fundamentally, people on lower incomes tend to rely more on benefits and local or central government services in all their forms, including education and the NHS. In contrast, wealthier people are more likely to send their children to private school, more likely to use BUPA, and generally get far fewer hand outs from the state – why use the library when you can just buy the book? In these circumstances, given that taxes aren’t doing the heavy lifting, it is very difficult to have any significant degree of retrenchment in public spending without hitting the poorest the hardest.
So, was the CSR regressive? Yes – sorry Nick. But, if you agree with the fundamental principle that public spending got out of control and needed to be cut back, it probably had to be.