Why you’ll be worse off whoever wins

AVERAGE incomes are set to fall whoever leads the next government, the Institute of Fiscal Studies (IFS) has said, as it published analysis of the tax and benefit plans of the main parties.

The economic think tank reviewed the Conservative, Labour and Liberal Democrat manifestos and produced a damning report on the findings, accusing all sides of ignoring major problems with the tax system, plucking anti-avoidance targets “from thin air” and leaving voters none the wiser.

Amongst the criticism was a claim Labour’s tough rhetoric on spending cuts was not matched by its announcements. Cutting the winter fuel allowance for higher-rate taxpayers was dubbed “fiscally irrelevant” and a 1 per cent cap on child benefit increases raises “literally nothing” because of low inflation.

The mansion tax on homes worth more than £3 million could have to be set at more than £16,000 a year to deliver the £1.2 billion Labour is seeking, the research indicated.

Meanwhile, Conservative policy on benefits has a £10bn gap which will be “neither painless nor easy” to fill, while the party’s planned cut to inheritance tax lacks any clear “economic or social rationale”.

Asked if any of the manifestos offered voters sound, evidencebased policy, IFS director Paul Johnson admitted the think tank was “struggling” to find much to approve of.

He said: “Obviously you have a choice about the benefits system – getting rid of the bedroom tax is clearly not necessarily a ‘bad’ policy. .”

He added: “It’s very easy to be even-handed [with criticism]. In a sense there are lots of similarities – they have all ruled out increasing the main rate, they have said effectively the same about pensions.”

The IFS said: “With significant deficit reduction still to come, households can expect the tax and benefit changes implemented over the next parliament to reduce their incomes, on average.

“There are large differences between the Conservatives, Labour and the Liberal Democrats in how they propose to do this.

“But they share a lack of willingness to be clear about the details and an inability to resist the urge for piecemeal changes which would make the overall system less efficient and coherent.”