IFS reaction to the Budget
I am sitting in the bowels of a University of London building listening to Robert Chote dissect Mr Osborne's Budget.
So far the most striking figure from the IFS post-mortem briefing is this: applying the planned squeeze in public spending evenly across departments would require an average cut of 14% in real terms by 2015-16.
The only reason we are talking about 25% cuts for most departments is the decision to protect the NHS.
That is a very expensive bit of protection. The chancellor this morning said that we could soften the blow for the Home Office and the rest by signing up for further benefit cuts instead. As the scale of the cuts becomes clear, I wonder whether the NHS will be put back on the table as well.
Update 1405: According to the IFS, unprotected departments like the Home Office and environment could have their budgets cut by as much as a third, if the NHS and overseas aid budgets are protected from real cuts, and defence and education are cut by less than others, as indicated by the chancellor.
The think tank calculates that this real cut for every other department would fall to 25%, if the spending review could identify another £13bn to cut from the benefit bill.
The total benefit bill is £270bn, but that includes the basic state pension and local authority-financed expenditure. There is about £154bn that could plausibly be cut.
Protecting ONLY the NHS and aid, and cutting this same £13bn from benefits, would reduce the average cut for other departments to 20%.
Update 1440: On the basis of the inflation forecasts included in the Budget, the IFS reckons that the decision to uprate most benefits in line with the CPI measure of inflation will amount to a 5% cut in these benefits, in cash terms, by 2015.
That is because the CPI typically rises more slowly than either the RPI or the other index previously used for uprating some benefits. The CPI excludes housing costs. It is also calculated slightly differently (for the aficionados, it's the difference between an arithmetic and a geometric mean).
So this is indeed a cut in benefits - which accumulates over time. But that should not be a surprise - given how much (nearly £6bn) that this one measure is expected to raise.
However, the government will be more embarrassed by another IFS conclusion, that the changes in benefits announced yesterday will significantly raise the number of households and individuals in the UK facing very high marginal tax rates on their earnings.
That was always inevitable, given that the Treasury was trying to save money by targeting benefits and tax credits more closely on lower income households. That necessarily means taking money away more rapidly as earned income goes up, meaning very high effective tax rates on that income.
However, it is not good news for Iain Duncan Smith and also many senior Liberal Democrats who, before the election, made much of the fact that the poorest people in society can face the highest tax rates. Thanks to yesterday's Budget, there are going to be a lot more of them.
Update 1500: As I noted here yesterday, the charts showing the impact on households of different incomes of the Budget included pre-announced changes such as Labour's National Insurance change, due to come in next year.
That turns out to have had an even larger impact than I thought.
Excluding those previously announced changes, the IFS says that the Budget yesterday was not progressive. The richest households did not pay relatively more.
Yesterday's Budget looks even more regressive when you consider the impact later in the Parliament, when the benefit changes have greater effect.
This is, again, inevitable, given the Budget's reliance on raising indirect taxes like VAT, and on cutting spending on means-tested benefits.
This conclusion would be even clearer, if it were possible to incorporate the housing benefit changes into the calculation (which, sadly, it isn't.) And - of course - we can say the same of the spending cuts to come in the autumn.