Wednesday, August 25, 2010

An Office for Distributional Responsibility?

The Budget in June included a chart showing that its measures would hit the rich hardest and the poorest the least. Within a day, the Institute for Fiscal Studies had demolished this as a farrago of dishonesty (I paraphrase) and that the truth was exactly the opposite.

Now they’ve done a more thorough analysis that confirms and deepens this picture, and the government is getting a deserved kicking all over the media. Its spokespeople are still pathetically clinging to the bar chart George Osborne produced, which included some of Labour’s redistributive policies and omitted some of his new ones.

I would like to protect Osborne from this criticism.

Shortly after the election, in setting up the Office for Budget Responsibility, he said:

We need long-lasting change in the way we put together budgets in this country. The final decision on the forecast has always been made by the Chancellor, not independent officials. And that is precisely the problem. Again and again, the temptation to fiddle the figures, to nudge up a growth forecast here or reduce a borrowing number there to make the numbers add up has proved too great.

It’s obvious that we can’t trust the Chancellor to produce a distributional analysis of his own policies. The temptation to fiddle the figures has proved too great, and the political importance attached to them means that politicians don’t have credibility to speak authoritatively here.

Given that the government has followed Labour in declaring that it wants to fight poverty, and that it has asked to be judged on the impact its policies have on the poorest, it’s clear that we need an independent expert body to do its own, non-partisan assessment here. The IFS is fantastic, but it doesn’t have full access to all the government data.

So maybe the government should set up an independent Office for Distributional Responsibility – not to rule on how much redistribution should happen, that’s a political judgement – but to analyse the financial effects of policies on different income groups and to assess progress towards whatever aims the government might set.

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