Transparency was a key theme of yesterday’s budget speech by the Chancellor George Osborne.

 

Within the opening five minutes, he had proclaimed that “I am not going to hide hard choices from the British people or bury them in the small print of the Budget documents.”

 

With this in mind, he became the first Chancellor to publish an analysis of how his budgetary measures would impact different income groups in the budget documentation, a decision that was praised in the Daily Mail as “brave”.

 

However Mr Osborne had barely had time to retake his seat in the Commons before he found himself under attack from Labour, which has called the chart “misleading”. Full Fact decided to investigate the controversy.

 

 

The bar chart in question, which is reproduced below, has been used by Conservative blogger Tim Montgomerie to justify Mr Osborne’s claim that “all sections of society contribute [to budget deficit reduction], but that the richest pay more than the poorest”.

 

The figures seemingly show the richest 10 per cent being hit with a 2 per cent net decline in their income as a result of the budget, compared to a 1.25 per cent and 0.75 per cent net reduction for the poorest two deciles respectively.

However the Labour Party, which has called the budget “unfair” and “regressive”, has attacked the use of the chart.

 

The party briefing claims that the chart “measures the impact of ‘all measures’ – including key progressive Labour changes to raise National Insurance thresholds for those on low incomes. It also only looks at 2012-13, before all the cuts to support for families announced today have been implemented.”

 

The Party also demands that the government “publish that table for each year of the Parliament and only including the announcements made by George Osborne today.”

 

Is this a fair criticism of the chart, and how does it affect Mr Osborne’s claim to have authored a “progressive” budget?

 

 

Labour’s claim rests upon two points of contention: that the ‘progressive’ elements of the government’s National Insurance policy are inherited from its Labour predecessor, and that the coalition is concealing the impact that cuts to child tax credits will have upon lower-income families after their introduction in 2013.

 

An Institute for Fiscal Studies briefing held this afternoon did seem to add some weight to Labour’s claims. An IFS spokesperson confirmed to Full Fact that the largest distributional policies were the result of ‘pre-announced measures’.

 

James Browne, the research economist responsible for the briefing said: “The big losses for the rich do stem from Labour policies such as the National Insurance rise.”

 

This is because low income groups such as pensioners and those out of work are not affected by the tax rise.

 

Mr Browne also lent support to the idea that by focusing the charts on 2012-13, the coalition avoided graphing the harshest of the cuts.

“The government’s measures affect poorer people more and more over time, as cumulative cuts such as CPI indexation increase,” he said.

 

So can Labour’s accusation be legitimated? The National Institute for Economic and Social Research did sound a note of caution.

Responding to the budget, the NIESR concurred with the IFS that lower income families would face cumulative cuts, but a spokesperson rejected the notion that this was, as Labour claims, due to “cuts to support for families”.

 

“The impact of reforms to benefits such as housing and child tax credits on specific income groups are difficult to forecast, and so aren’t included in Treasury breakdowns. These charts won’t reflect these cuts.”

 

A Conservative party spokesperson also contested the idea that Labour could claim the credit for the progressive measures in yesterday’s budget.

 

She told Full Fact: “The government made a very difficult decision with regard to National Insurance. Many felt that keeping a tax that was directly related to employment was counterproductive, but the Chancellor recognised the need to keep a progressive balance to the reforms that affect people proportionally to their income.”

 

 

Claims that the progressive nature of yesterday’s budget was bolstered by the previous Government’s measures appear to be valid, as do warnings about the situation faced by those claiming tax credits after 2012/13.

However, Labour’s shadow ministers are perhaps stretching the point by labelling the charts “misleading.” As the NIESR has noted, it is difficult to forecast the exact impact that changes to family support measures will have on differing income groups, as extraneous factors are involved in their calculation. Furthermore the key factor identified by the economists as driving the cumulative reduction in lower income earnings – the switch to CPI indexation – is indeed modelled for the full five years of the Parliament in the red book tables. The use of the chart in the budget documentation would therefore seem to reflect the best available data, however incomplete, rather than a deliberate attempt to mislead.