IFS paper scathing on Tory and Labour benefit plans

Benefit reductions proposed by Labour are “trivially small relative to the rhetoric being used”, while Conservative cuts continue to be “unspecified”, according to the Institute for Fiscal Studies (IFS).

In a paper containing scathing criticisms over tax and benefit proposals put forward by the Conservatives, Labour and the Lib Dems, the IFS says it finds “little evidence of any coherent strategy, and numerous proposals that would complicate the tax system”.

The IFS says Conservative plans to save £12bn would almost certainly require “sharp reductions in the generosity of, or eligibility to, one or more of child benefit, disability benefits, housing benefit and tax credits”.

Meanwhile the paper claims Labour’s intention to abolish the transferable personal allowance for married couples, and use the money raised to reintroduce a 10 per cent starting rate of income tax would simply replace one small complication in the system with another.

It says: “It is hard to think of any economic justification for a 10 per cent starting rate over a small range of income”, which would be worth about 50p per week to most tax payers.

The analysis says Labour’s plan to increase the additional rate of income tax to 50 per cent would likely only raise £100m, while proposals to remove winter fuel payments from higher-rate taxpayer pensioners and to limit cash increases in child benefit to one per cent “would save next to nothing”.

The IFS is also critical of housing policies presented by the Tories, Labour and Lib Dems, saying: “None of these proposals even begins to tackle the huge problems in the current design of council tax and stamp duty land tax. They are irrelevant to the fundamental problem of lack of housing supply.”

The Tories face criticism over how it will meet its £12bn spending cut targets.

IFS analysis shows that if state pensions and universal pensioner benefits are protected, then cuts of 10 per cent would be required to areas such as child benefit, disability benefits, housing benefit and tax credits to make £12bn in savings.

Robert Joyce, a senior research economist at the IFS, said: “The Conservatives have continued to fail to explain how they would achieve the substantial cuts to social security they say they would deliver in the first half of the coming parliament. These will be neither easy nor painless to deliver. Meanwhile, Labour claims to be taking tough decisions by removing winter fuel payments from a small fraction of pensioners and limiting child benefit increases to one per cent.”

“The former will save almost nothing – about one pound in a thousand spent on pensioner benefits. The latter is likely to save literally nothing. The manifestos have not helped us towards a sensible debate on the future generosity or structure of the benefits system.”