George Osborne claimed at the start of his Emergency Budget speech today that this was going to be a budget in which we’d all feel the pain, but the better off would shoulder more of the burden. Perhaps that’s why one of his first announcements was that the Queen will face a freeze in the Civil List in 2011 at £7.9 million.

There are some progressive elements to the budget. The increase in the capital gains rate for higher rate taxpayers to 28 per cent is to be welcomed: wealth is an undertaxed resource in the UK, and the reform will help to ensure that people who avoid paying income tax by converting their income into capital gains pay their fair share towards the economic recovery.

The freezing of child benefit for the next three years is more than offset for the poorest income groups through an increase in the child element of child tax credit of £150 a year for the least affluent families. Increasing the personal tax threshold will benefit basic-rate taxpayers, although it will do nothing to help those on a low-income who do not pay tax, including low-income pensioners (who will also be hit by cuts in pension credit).

However, the hike in VAT from 17.5 to 20% is a hugely regressive tax rise that impacts on the poorest the most – and offsets the more progressive tax measures. Treasury forecasts within the budget show that the poorest 10 per cent will be hit the hardest overall by the changes: they will proportionately be worse off than people at the median.

Also of concern for the poorest families is the abolition of cash grants like the Sure Start maternity grant (now limited to a first child) and the health in pregnancy grant. These don’t show up much in the distributional analysis because they’re a one-off payment to families when they are facing high-cost events like the birth of a new baby, but cuts to these will make a real difference to hard-up families.

What is really worrying, however, is that the worst is yet to come. By adopting a 77:23 ratio of spending cuts to tax rises in order to fill the hole, Osborne has put off the bulk of the pain until the autumn spending review, when he will be announcing real spending cuts in all departments other than the NHS and development aid averaging 25 per cent. This is when the real damage will be done: people who are less affluent are more dependent on public services and are more likely to be employed in the public sector, particularly in the regional economies.

If the government was serious about consolidating the deficit fairly, it would have put more of the burden on progressive and green tax rises: for example, by introducing capital gains tax on primary residences, introducing a carbon tax with protections for low earners; and moving from per-passenger to per-plane avaiation duty – all measures that would move us towards a fairer and greener tax system.

Osborne has justified his regressive 77:23 ratio with reference to an ‘international gold standard’. But there’s little evidence that this exists: countries such as Canada that used similar ratios did so against a global context of economic growth, which significantly boosted their own economy during their own consolidation. An OECD review of fiscal consolidations in 85 countries found that in two-thirds of cases, revenue increases accounted for a higher proportion of deficit reduction than spending cuts. The last time the Tories made significant cuts in the early 1990s, it was done using a 50:50 ratio.

A 67:33 ratio would be more progressive, enabling the Coalition Government to ensure that the pain is genuinely fairly spread. Spending cuts on the scale proposed by the coalition risk economic recovery itself and a double-dip recession.

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