UK Politics

No clear political winners in IFS economic analysis

Supermarket till
Image caption The IFS suggests pressure on living standards will start to ease

The headlines that followed today's publication from the Institute for Fiscal Studies (IFS) could have been based on different documents.

While one declared the "end is in sight for austerity", another warned that "more than half of George Osborne's planned cuts still to bite".

In truth, the so-called 'green budget' - an annual examination of economic policy - left room for those on all sides of the political divide to pick out the parts that best suit their message.

It recognised the UK recovery has gathered pace, but pointed to growth largely based so far on consumer spending.

It said that even by the most pessimistic forecasts the planned consolidation would offset the damage done by the financial crisis, but the IFS also warned people not to be lulled into a false sense of security as there are further tough spending cuts still to come.

It gave some titbits for parties to celebrate, and others they'll want to ignore.

Crucially along with its comment on the state of public finances, the global economy, the housing market and business rates, the research examined the squeeze on incomes and policies to help the low paid.

Cost of living

The cost of living debate will be one of the front lines of the political battleground in the run up to the 2015 general election. Each party is trying to convince voters its policies will put pounds back in their pockets.

There was good news for the government - the IFS said the cost of living "crisis" is about to turn around.

But there was also scope for Labour to make ground, as it found living standards have "fallen dramatically" since the recession and are unlikely to recover to pre-crisis levels by 2015/16.

This won't come as a surprise to politicians, who have been keen to show they understand the economic pain of ordinary people.

What they won't be so keen on is the IFS analysis of their policies to tackle the problem, where no-one came out on top. The coalition government is raising the income tax personal allowance for under-65s to £10,000.

'Poorly targeted'

The IFS recognised this will take two million people out of income tax altogether, but said a further raise would be "expensive and poorly targeted" at helping the low paid.

However even this, according to the IFS, would be better than the Labour idea of a 10p tax rate, which would be "less well targeted on the low-paid and would add to unnecessary complexity".

In fact the IFS found it hard to find "a coherent economic rationale for it."

The parties quickly came out in defence of their plans.

The Lib Dems said they are "nothing other than incredibly proud" of the tax cuts delivered which 'make work pay'.

Similarly Labour said a lower tax rate would "help make work pay" and cut taxes for 24 million people on middle and lower incomes.

The Conservatives said the IFS report shows their long term economic plan is working and supports their philosophy that those with the broadest shoulders should bear the greatest burden.

The battle cries don't sound that different.

There may be no clear political winners or losers in the hefty budget book. But that won't stop each party poring over its 274 pages to find the weapons they can wave in the fight for economic credibility and voter confidence.