IFS Analysis: UK Spending Cuts Disproportionately Impact Low-Income Households
Spending Review Analysis
The Guardian’s Perspective (October 21, 2010)
The Guardian published an article titled “Spending review cuts will hit poorest harder, says IFS” on October 21, 2010. This left-of-center newspaper traditionally opposes liberal economic policies and favors government intervention. Economics correspondent Phillip Inman presents a critical view of the government’s spending cuts, citing analysis from the Institute for Fiscal Studies (IFS).
The Spending Cuts Program
Government Presentation
The Conservative government prioritized reducing the national deficit and debt, justifying austerity measures as “fair” and shouldered by “those with the broadest shoulders.” They claimed the richest would bear the brunt of the impact.
IFS Findings
The IFS revealed that the cuts were controversial due to their extent and targets. Welfare benefits, accounting for 28% of public expenditure, faced an £18 billion annual reduction. The IFS described the cuts as “regressive,” contradicting the government’s claim of fairness.
Impact on Society
Key cuts included:
- Welfare: Savings of £18 billion annually through less generous benefits and tax credits.
- Housing Benefit: Limited to around £400 a week, with 10% cuts for those on jobseeker’s allowance for over a year. An estimated 83,000 people faced eviction, and 1.3 million anticipated increased debt.
- Benefit Cap: No family on benefits could receive more than the post-tax income of a working family (£500 a week), causing widespread indignation.
- Child Benefit: Three-year cuts, withdrawn from families with a higher-rate taxpayer parent, affecting 1.2 million of 7.8 million recipient families.
These cuts occurred during the Conservative-Liberal Democrat coalition government, amidst the UK’s recovery from the 2008 financial crisis. The article, published before a full spending review, highlights the controversy surrounding the cuts and the IFS’s assessment of their regressive nature. The question remains: To what extent were these reforms regressive, and what were their long-term consequences?