Nick Clegg was apparently obsessed with the chart below, which shows the impact of the Budget measures across the income scale. The coalition have bet the ranch on “progressive austerity” and they think these statistics vindicate the claim that this is a tough but fair fiscal medicine.
The trouble is that this chart showing the spread of pain from the tax rises and benefit cuts is just a snapshot of 2012. It won’t look as fair after that.
It misses the full impact of the squeeze on benefits, which accelerates after that date. So this chart only covers cuts to welfare spending of £4.7 bn — a further £6.3bn is expected after 2012. After the Autumn spending review, that figure will rise further.
Now the Osborne team insist they have been incredibly transparent in producing this chart. Looking at the picture in 2014 would be misleading, they say, because there may be other tax breaks or increases in tax credits in future Budgets.
Nevertheless, the incomplete picture hides the pain ahead for poor people. It underlines how difficult it will be to meet the coalition promise to avoid balancing the budget on the backs of the vulnerable.
Benefits largely follow need and overwhelmingly directed to those on low incomes. Cutting welfare bills inevitably hits them harder. (Just look at the distributional impact of the freeze on the universal child benefit, for instance.)
Even if these distribution charts were completely fair, they would still miss the double hit on the poor of cutting spending on public services. Low income groups are more reliant on health and education services, as well as direct benefits. The ONS try to put a number on this and estimate that the “benefit in kind” of education for the bottom fifth on the income scale is £5,260, while only £1,223 for the top fifth.