In the period since the impact of the financial crisis became apparent in its public finance forecasts, the current Labour government has announced and legislated for a number of net tax increases and benefit cuts to take effect over the course of the coming parliament to help reduce government borrowing. Labour has made no significant additional proposals in its manifesto. The Conservatives have accepted the bulk of Labour's proposals, but have also announced a very small additional benefit cut and a more substantial net tax cut to be paid for by cuts in spending on public services. The Liberal Democrats propose an additional cut in benefits than the Conservatives and a modest net tax increase rather than a net tax cut. The modest net tightening relative to Labour's plans masks much larger gross giveaways and takeaways in the most far-reaching of the three packages.
This note discusses these various proposals, looking at their economic and administrative merits, their distributional impact and their effect of incentives to work and save.