In fact, if you look at the widely touted distributional impact tables in the Red Book. (Annex A, page 63), you see that all the heavy lifting on progressive taxation is done by reforms introduced by the previous Labour government, not by yesterday’s Budget (the black bar in chart A2, for the top decile). The poor lose primarily by the increase in VAT. The middle classes lose tax credits and pay more VAT. And the better off lose from direct tax and National Insurance changes inherited from Labour – almost nothing at all from anything agreed by the Coalition. Moreover, as Alex Barker points out in the FT, these tables do not include the full impact of benefit cuts, since these are not felt until after 2012/13.
Pearce anatomises how much and how little of the LibDem tax fairness manifesto has survived:
Tellingly, the central Liberal Democrat election commitment to fairness in taxes and benefits has been abandoned. A few facts illustrate this simply enough. In their Manifesto, the Liberal Democrats promised to raise nearly £2 billion from Capital Gains Tax reform. The Budget secures less than half that (£925 million). In addition, they pledged to raise £5,455 billion by restricting tax relief on pension contributions to the basic rate. This highly progressive measure has now been completely dropped. Ditto the Mansion Tax on properties worth over £2 million, due to have raised £1.7 billion. And there was barely a mention of the green taxes they had pencilled in to raise over £3 billion in the Budget. On almost every score, their pre-election tax package has been stripped of its progressive content ...
He also suggests the most progressive Tory voice has not got his message across to colleagues:
And the overall story of this Budget is one of generational injustice, with cuts falling on working age families and those with children, but not the asset rich pensioner population. David Willetts’ warnings have been not been heeded.
There are some important future policy and political challenges for Labour in the piece - "Retreating to occupy the space of defender of the public sector and its staff is political suicide in the long run" - in staking out the argument for what Pearce calls a "social democratic majoritarianism", which sounds as though it has a familial resemblance to the reciprocity-based universalism set out by Tim Horton and James Gregory in the Solidarity Society.
Read the full piece here.