Friday 22 October 2010

"Distorted nonsense"? How we are taking up Clegg's CSR challenge

The Nick Clegg versus the IFS rematch begins with the Deputy Prime Minister showing his characteristic enormous confidence and chutzpah in this now traditional fixture, now telling The Guardian the economic think-tank's analysis of the CSR is "distorted nonsense".

"I think you have to call a spade a spade. We just fundamentally disagree with the IFS. It goes back to a culture of how you measure fairness that took root under Gordon Brown's time, where fairness was seen through one prism and one prism only which was the tax and benefits system. It is a complete nonsense to apply that measure, which is a slightly desiccated Treasury measure. People do not live only on the basis of the benefits they receive. They also depend on public services, such as childcare and social care. All of those things have been airbrushed out of the picture by the IFS."

What a spade! Clearly, Nick Clegg thinks the distributional analysis of the government's spending cuts is much more progressive than that of its regressive tax and benefit changes.

Well, it's a hypothesis, I guess. And the Deputy PM ought to know what he is talking about, having said that this issue of fairness was "literally the question I have been asking myself every single day of this very difficult process". Clegg shows a lot of fighting spirit for a man four-nil down to the IFS before half-time. Will this interview mark an audaciously brilliant comeback - or prove his most spectacular own-goal yet?

Since Clegg has thrown down the gauntlet so publicly, the quality of public policy debate depends on somebody being willing to pick it up.

Now that the relevant information is public, we shall be able to provide him with a comprehensive answer to that today. Howard Reed and Tim Horton will be providing a post-CSR update to their TUC report. This new analysis of the CSR will assess precisely what Clegg tells The Guardian he is most interested in - the distribution of spending and spending cuts, and what they tell us about the progressive/regressive balance of his CSR as a whole.

So fingers' crossed, Nick.

It is true that the IFS analysis of the "regressive" budget in June was about tax and benefits - and so did not assess the spending cuts which make up three-quarters of the government's deficit reduction plan.

But the IFS did include public services and spending cuts analysis in their post-CSR presentation yesterday, finding the cuts to be regressive too.

It is important that the Treasury responded to calls from us and others to make its first (acknowledged to be tentative) attempt to do this in its CSR document. As the IFS said yesterday, the Treasury's own modelling and numbers do suggest that the impact of spending cuts is regressive, as we set out on Left Foot Forward on Wednesday night (despite one very silly Treasury graph trying to stand the data on its head, finding a way to claim that similar cuts in services with a cash value of £520 hit households on £48,000 harder than those on £19,000). While there are a range of methodological challenges and debates in this relatively new area, it is important to try to account for the full range of public spending and to include all of the changes wherever possible.

The Treasury distributional analysis omits 50% of public spending - including policing and home affairs, for example. It also, bizarrely, still leaves out one-third of the government's benefit cuts, on the pretext that these are hard to model even though the IFS has shown how to do it, and modelled them for the Treasury. (The IFS point out that it is rather harder to model the pupil premium, which the government did include).

More later ...

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