POLITICS

Budget 2015: 'Regressive' George Osborne Taking More Money From Poor Than Rich, Says IFS

09/07/2015 14:36 BST | Updated 09/07/2015 14:59 BST

George Osborne took much more money from poor people than he did from the rich in his Budget, the independent Institute for Fiscal Studies (IFS) has concluded.

The think-tank's economists also said several of the chancellors tax changes "make no economic sense".

Yesterday the chancellor said he wanted to create a "higher wage, lower tax, lower welfare" country. The flagship announcement was a surprise introduction of a new National Living Wage which will reach £9 an hour by 2020.

But Osborne also announced billions of pounds worth of cuts to tax credits - which top up the wages of low-paid workers.

In its analysis of the Budget measures released today, the IFS said 13 million families will lose an average of £260 a year due to a freeze in working age benefits, tax credits and local housing allowance out to 2020.

Three million families also look set to lose an average of £1,000 a year due to cuts to Universal Credit. And the changes will also reduce the incentives people have to move from unemployment into work.

IFS director Paul Johnson said: "Given the array of benefit cuts it is not surprising that the changes overall are regressive – taking much more from poorer households than richer ones.

"Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average."

Johnson also said it was "arithmetically impossible" for the National Living Wage, which is in effect a raise in the minimum wage, to make up for the losses that will be experienced by tax credit recipients.

And the IFS dismissed Osborne's suggestion that his Budget would create a "lower tax" country. "This was a tax raising budget, not quite consistent with the boast that it was aimed at a lower tax country," Johnson said.

According to the IFS, Osborne's Budget will see taxes rise by £6.5bn a year by 2020

Labour, which is in the middle of a leadership election, has given a somewhat muted response to Osborne's Budget. However the leadership candidates have been more aggressive.

In a blog featured on The Huffington Post, frontrunner Andy Burnham said the chancellor had delivered a "slap in the face for young people"

"His flagship proposal of a 'National Living Wage' only kicks in at 25, but his cuts to tax credits affect people of all ages. He was not honest about this before the election and has no mandate for his plans. There is a real risk this will cement a two-tier workforce between young and old as he brings down the deficit on the backs of young people," Burnham said.

And Ed Miliband, who has made several interventions since losing the election in May, tweeted: "The challenge for the Chancellor is that he claimed the mantle of One Nation. But @TheIFS figures suggest a profoundly regressive Budget."