Iain valiantly tries to deflect this morning’s attack on the Coalition for the now obvious regressive qualities of the June budget, not just by claiming that the report is old (it’s not), but by saying that the IFS doesn’t think VAT is regressive, and that this means everything is just fine.
To be fair to Iain, that’s probably a better line of defence than the Treasury saying the budget doesn’t hurt the poorest most because of reduced Corporation Tax, which is one of the stranger arguments I’ve seen.
Even so, it’s a pretty weak defence, because it’s not correct.
Iain relies on a James Browne, a ‘Research Economist’ at the IFS, for his claim that, because VAT is not payable on essential items, then it actually hits the richer hardest. He refers to what appears to be a telephone conversation on 28th June between Mr Browne and a Total Politics magazine person, although there is no direct quotation:
According to Brown, the Budget is regressive overall, in that it will hit the poorest the hardest, yet its VAT increase is actually progressive. As poorer people tend to spend more money on 0-rated necessities [products without VAT], they will be largely unaffected by the VAT increase: It is the richest, with the higher expenditure, who will actually be feeding the government’s coffers with a VAT increase.
Let’s move on from the statement that the ‘budget is regressive overall’, and even from the fact that Browne’s logic is at fault – the fact there will be higher VAT contributions from richer people (because they’ve got more money overall) is NOT the same as saying VAT is progressive, because such a fact doesn’t mean the poor won’t be hit hardest.
Let’s go straight instead to what Robert Chote, Director of the IFS and James Browne’s boss, said to the government’s own Treasury Select Committee three weeks later:
We asked our expert witnesses whether the VAT increase was a ‘progressive’ or a ‘regressive’ measure. Robert Chote told us that the key issue when assessing this question was whether you looked at the impact of a VAT rise on people “according to their living standards in a particular snapshot as measured by income or over a lifetime period”.
He explained that VAT looked particularly regressive when compared against income because “the poorest decile spend a relatively high amount relative to their income, you hit high spenders hardest and, therefore, not surprisingly that shows it to be regressive”.
Perhaps, then, the Tories have a problem with what ‘regression’ actually means.
Rather than taking it mean what people generally take it to mean – whether or not the taxation in question impact more on the living standards/income of the poorer members of society – perhaps they think it has nothing to do with this relational quality, and simply refers to where most money will come from.
Or perhaps Iain’s defence is simply desperate.
ps. I also noted this little gem in Iain’s preceding post about language teaching in schools:
Perhaps, however, we are also guilty of being too conservative in our teaching of languages. Maybe instead of sticking to trusty old French and German we should be encouraging schools to offer more courses in Spanish, Arabic, Mandarin and Russian.
Iain sometimes doesn’t seem very in touch with the 21st century. Just as he was at least 10 years out of date on his understanding of nursing, so he’s out of date on what languages are actually being taught nowadays.
As the CILT (The National Centre for Languages) reports in its 2009 Language trends report:
This year for the first time more maintained schools reported offering Spanish than German at Key Stage 4……..Lesser taught languages are continuing to grow…..The offer of Mandarin has grown in both sectors and particularly in independent schools, where 40% now offer it in one form or another……