Budget: Household Impact

Lord O'Neill of Gatley Excerpts

Wednesday 16th September 2015 Lords Chamber

[Lord Wood of Anfield]

To ask Her Majesty’s Government whether they intend to publish a distributional analysis of the impact of the Budget on households with different levels of income.

[The Commercial Secretary to the Treasury (Lord O'Neill of Gatley) (Con)]

My Lords, distributional analysis of the impacts of government policy across household income distribution was published by HM Treasury alongside the summer Budget. The analysis presents the cumulative impacts of policy decisions since the June 2010 Budget, up to and including the 2015 summer Budget. It shows that the proportion of public spending received by households in each income quintile remained similar between 2010-11 and 2017-18.

[Lord Wood of Anfield (Lab)]

I thank the Minister for that Answer. The Institute for Fiscal Studies estimates that the Budget has made 8.4 million working families worse off, many considerably so, through tax credit changes. However, the Chancellor has unilaterally decided not to tell the British public from now on what the distributional impact of the Budget measures will be. It is ludicrous to argue, as he does, that having a deficit justifies not publishing information about the regressive effects of the Budget. Does the Minister agree with the Resolution Foundation, which said:

“Deciding to ditch Budget distributional analysis is a retrograde move for which there is no plausible good explanation”?

Will he urge the Chancellor to rethink this attempt to hide information from the public?

[Lord O’Neill of Gatley]

My Lords, contrary to that question, as a result of some discussions involving the Chancellor, the specific distributional analysis that was requested was posted on the government website on 21 July. There followed a number of conversations outlining the Treasury’s belief that the new analysis was intellectually superior to those in the preceding Parliaments. I should add, however, that the requested distributional analysis has indeed been published, despite the apparent lack of awareness of it displayed in the previous question.

[Baroness Kramer (LD)]

My Lords, it is certainly a disgrace that the distributional analysis was not published with the Budget, a practice followed by the coalition every year so that questions could be asked during Budget-related debates. Can the Minister confirm the analysis of the IFS around the distribution that the only gainers from the tax and benefit changes are the richest eighth and ninth deciles, and that the big losses are all concentrated in the poorest first to seventh deciles, with the very poorest among the biggest losers?

[Lord O’Neill of Gatley]

My Lords, the distributional analysis subsequently published on the government website, as I just outlined, actually shows that if one needed to specifically pick where the impact was felt most severely across the different quintiles of income distribution, it was in the highest 20%.

[Lord Vinson (Con)]

My Lords, when addressing this Question, could the Minister bring to the attention of the House that, according to Treasury figures on 21 July, the debt-servicing costs of our huge borrowings is £1,841 per household? Is it surprising that people feel hard up? That money must come out through tax, VAT and other directions somewhere. Individually per household, that is what is being paid.

[Lord O’Neill of Gatley]

My Lords, I cannot recollect the exact numbers but those suggested by my noble friend sound broadly accurate. It is right to refer to such parameters. Indeed, the approach towards the now preferred way of presenting the distributional analysis is predicated on taking account of the consequences of the amount of public debt and, implicitly with that, the appropriate desire of the Government to reduce that level of debt.

[Lord Grocott (Lab)]

My Lords, I thought the Minister said that the biggest losers were those with the highest incomes. Does he have any information for the House on how they are coping?

[Lord O’Neill of Gatley]

My Lords, I have not had time, given a very busy schedule since returning from Recess, to conduct a personal survey but if the noble Lord would like to join me in such an activity, perhaps we should undertake it together.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend agree that the policy of subsidising low wages and creating dependency on high welfare payments was instituted by the last Labour Government? Is it not very rich of Labour to criticise this Government for unwinding that by ensuring that people have higher wages and lower taxes, and that their dependency on welfare is reduced?

[Lord O’Neill of Gatley]

My Lords, I thank my noble friend for that important point. As I hoped to suggest at the appropriate moment—it is here—this Government were elected with the clear intention of reducing the burden of taxation and bringing us to a lower-tax and less welfare-dependent society. That is what is being done further in this latest Budget.

[Baroness Manzoor (LD)]

My Lords, does the Minister agree that going on the backs of the poorest and most vulnerable in our society cannot be the way forward, if we want a genuinely equal society that really looks after the very poor and most vulnerable—people with illnesses who cannot go out to work, or people who are on tax credits who already go out to work and are suffering because they do not get the wages due to them?

[Lord O’Neill of Gatley]

My Lords, I do not want to bore Members of the House by repeating things I have already said but the distributional analysis shows that the biggest burden has been on the highest quintiles. Let me highlight another important factor: this morning, we had the latest employment and earning statistics. In addition to the rather pleasant news that unemployment has fallen further, we have reached a new level of record full-time employment and, very encouragingly for all members of our earning and working society, average earnings have accelerated now to a level of 2.9% year on year, making it clear that the benefits for those in work are starting to increase more and more.

[Baroness Smith of Basildon (Lab)]

My Lords, the whole purpose of tax credits was to make work pay, and 8.4 million people have lost income through the Government’s changes. The Minister said that his way of showing the analysis—his publication—is the preferred way. It seems to me that the only people who prefer it are the Government. Does he understand that it would be right to commit to the public being able to see the impact of the individual measures of the Budget, and that it should be published alongside the Budget at the same time?

[Lord O’Neill of Gatley]

My Lords, the much-quoted research of the IFS is to be complimented, as it offers an independent judgment on the Government’s fiscal policies. The Government’s own fiscal measures are presented in great detail in the Budget report and assessed independently in many details by the independent ONS. The distributional analysis that has been requested and tabled here has now been presented in the traditional format that was agreed by the previous coalition.