CSR: less well off will be hardest hit - IFS

Chancellor George Osborne's spending cuts will hit the poorest harder than the better off, the Institute for Fiscal Studies think tank warned today.

In its analysis of Mr Osborne's spending review, the IFS said the changes announced yesterday would reinforce the "regressive" nature of the Government's plans to tackle the deficit, including the £7 billion of welfare cuts.

It said that with the exception of the richest 2% of the population, the less well off would be proportionately the hardest hit, with families with children the "biggest losers".

"The tax and benefit changes are regressive rather than progressive across most of the income distribution. And when we add in the new measures announced yesterday this is, unsurprisingly, reinforced," said IFS acting director Carl Emmerson.

"Our analysis continues to show that, with the notable exception of the richest 2%, the tax and benefit components of the fiscal consolidation are, overall, being implemented in a regressive way."

IFS analyst James Browne added: "Overall families with children seem to be the biggest losers."

The IFS said that while the overall spending cuts were the deepest since the Second World War, the welfare changes meant that the cuts to Whitehall departments would only be the deepest since the 1970s, following the bail-out by the International Monetary Fund.

Mr Browne said that while the Treasury had claimed the overall package was "progressive" - as a result of measures previously announced by former chancellor Alistair Darling - it had ignored a third of the welfare changes.

"The poorest are losing more as a proportion of their income as a result of these changes," he said.

The IFS also challenged Mr Osborne's claim that the Government's cuts to those departments whose budgets were not protected averaged 19% compared with 20% implied by Labour's plans.

It said the Mr Osborne's figures failed to take into account the £6 billion of cuts already announced by the Government this year while the actual figure under Labour would have been 16%.

While education emerged as one of the winners yesterday, with a small real terms increase in schools spending, the IFS said that rising classroom numbers meant that spending per pupil would fall by 2.25% over the next four years.

It said the 60% of primary school pupils and 87% of secondary school pupils were attending schools where spending would fall in real terms.

The IFS also criticised plans to scrap council tax benefit and replace it with a system of locally administered council grants.

It said that it would create a "postcode lottery", providing an incentive to councils to award grants in a way that encouraged poor families to leave the area.

"The incentive it provides to local authorities to encourage low-income people to move elsewhere is undesirable," Mr Emmerson said.