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Offices of the IFS in London
|Legal status||Non-profit company|
|Purpose||To inform public debate on economics, via establishment of rigorous independent research, in order to promote the development of effective fiscal policy.|
(President: Rachel Lomax)
|Affiliations||Economic and Social Research Council (ESRC)|
The Institute for Fiscal Studies is an economic research institute based in London, United Kingdom, which specialises in UK taxation and public policy. It is politically independent and produces both academic and policy-related findings.
The Institute's aim is to "advance education for the benefit of the public by promoting on a non-political basis the study and discussion of and the exchange and dissemination of information and knowledge concerning national economic and social effects and influences of existing taxes and proposed changes in fiscal systems."
The Institute was founded in response to the passing of the Finance Act 1965 by four financial professionals: a banker and later Conservative Party politician (Will Hopper), an investment trust manager (Bob Buist), a stockbroker (Nils Taube), and a tax consultant (John Chown). In 1964, the then Chancellor of the Exchequer James Callaghan had made a speech announcing his intentions to make changes to the tax system, including the introduction of a capital gains tax and a corporation tax. The group felt that the proposals were "half-baked". Nils Taube had commissioned John Chown to prepare a professional analysis of the speech and its effect on share prices. Chown described what he thought the impact of the proposals would be if implemented but also treated the exercise as a "reductio ad absurdum" and suggested that "the government and its advisors had three or four months for second thoughts and, recognising some of the dire consequences, would modify their original proposals." The Chancellor did not change his mind. This led to further discussion among the group about their views on tax reform and the Budget process. In Chown's words, the group wanted to ensure that "never again should a government, regardless of its political colour and intentions, introduce far-reaching tax legislation without the benefit of deep and thorough analysis of second- and third-order effects."
In 1967 a brainstorming weekend took place at The Bell, Aston Clinton. In the same year, the group published A Charter for the Taxpayer with proposals for tax changes in The Times, and Jeremy Skinner and Halmer Hudson joined the group. Will Hopper has recalled that the idea of a research institute did not take shape until some time later at a dinner which was attended by Bob Buist, John Chown, Nils Taube and himself on 30 July 1968 at the Stella Alpina restaurant, 32 North Audley Street, London, at which a decision was made to found the Institute. Will Hopper proposed the name 'Institute for Fiscal Studies'. 'Fiscal' was selected rather than just 'tax' "because we wished to include the other side of fisc. You cannot discuss the economic impact of taxation without looking at expenditure and the balance between the two." The Institute was formally incorporated on 21 May 1969.
As well as research, the Institute had wider, unspoken objectives. The founders did not just want to start an Institute; they wanted to change British fiscal strategy. In particular, the group's declared aims were "to alter the climate of opinion within which changes to the British tax system were considered; to alter the procedures by which changes in the tax system were effected; and to help create a more rational tax system".
In 1970, Dick Taverne, then a Labour MP and a former Financial Secretary to the Treasury in the Wilson government, was approached to be the Institute's first director. In 1971 a Council of the Institute was formed, with President Sir Richard Powell (civil servant) and Vice-Presidents Roy Jenkins (Labour Party) and Selwyn Lloyd (Conservative Party). In the same year an Executive Committee was formed, with Will Hopper as Chairman, Halmer Hudson as Secretary and Buist, Chown, Skinner and Taube as Members. In 1972, the first full-time staff of the Institute were appointed. In 1974, the Institute moved from Bell Yard to Chandos Place. In 1975, the Meade Committee began its enquiries under the leadership of the later Nobel laureate James Meade. Simon Akam wrote in The Guardian in 2016: "Meade was assisted by two young economists: John Kay, who would go on to become director of the IFS, and Mervyn King, who would later become governor of the Bank of England." In 1978, the Meade Report was published and the Institute moved to Castle Lane. In 1979, the Fiscal Studies publication was launched and the Working Paper series began. In 1980, the Armstrong Report was published. In 1982, the Report series was launched and the first Green Budget was issued. In 1984, The Reform of Social Security document was published by the Institute. In 1985, the Institute moved to Tottenham Court Road. In 1987, the Capital Taxes Group was established. In 1990, the Institute moved to Ridgmount Street. In 1991, the ESRC Centre was inaugurated. In 1994, the Tax Law Review Committee was established.
Areas of research covered by the Institute include public finance and spending, pensions and saving, company taxation, consumer behaviour and poverty and inequality. Although most of the Institute's research is UK-focused, recent work has also looked at international development policies, for instance at education and nutrition programmes in Colombia. In October 2016, Professor Orazio Attanasio, the IFS' Research Director and Head of UCL Economics, won the Klaus J. Jacobs Research Prize for his work in the latter field.
The Institute is home to – or a partner in – the following research centres (some of which are described further, in following sections):
Since 1991 the Institute has hosted an Economic and Social Research Council (ESRC) research centre, the Centre for the Microeconomic Analysis of Public Policy (CPP). The CPP is directed by Professor Richard Blundell and co-directors, Professor Orazio Attanasio, Professor James Banks, Professor Rachel Griffith, Professor Costas Meghir. The CPP carries out microeconomic analysis of major public policy issues, including productivity growth, poverty reduction, promoting employment and ensuring sound public finances. Its focus is on the modelling of individual, household and firm behaviour.
Cemmap organises regular training courses and masterclasses and is home to one of the world's leading working papers series in the field of microeconometrics with over 100 titles, many of which are published in leading journals.
The Institute regularly publishes policy-reports and academic articles. It also produces a peer-reviewed quarterly journal, Fiscal Studies, which publishes articles submitted by a range of academics and practitioners in the field. The IFS Green Budget, which discusses policy issues which are likely to be relevant for the Chancellor of the Exchequer's annual budget statement, is published early each year.
Another noteworthy publication is the Mirrlees Review, which was published in September 2011. The review consists of two volumes. The first of these is a series of chapters covering different aspects of the UK tax system, accompanied by commentaries voicing different opinions. The second sets out the conclusions of the review. The review was chaired by Nobel Laureate James Mirrlees and included contributions from IFS staff alongside prominent economists from various universities around the world.
The Institute frequently speaks out on politically important issues and has at different times been criticised from both sides of the political spectrum. In October 2010, Deputy Prime Minister Nick Clegg accused the IFS of using methods that were "distorted and a complete nonsense" after it challenged government claims that tax and benefit reforms in the June 2010 Budget were "progressive".
In 2016, The Guardian stated: "Some left-leaning economists look with particular scepticism on the claim that the IFS has no ideology, arguing that the institute holds an excessive faith in the power of market forces. The tax campaigner Richard Murphy, a professor of political economy at City University who advised in Jeremy Corbyn's campaign for the Labour leadership, said the IFS was 'embedded in all the normal, standard pro-market assumptions that dominate conventional economic thinking in the UK and elsewhere'." Richard Murphy also stated in a report that the "Institute for Fiscal Studies is a body that persistently recommends tax increases that benefit the wealthiest in society at cost to those who make their living from work and the poorest in society".
On another occasion, the right-leaning magazine The Spectator published a leader stating that "'institutes' funded by research grants (which means, usually, tax money) will always argue for more expensive meddling by the state" and that the Institute for Fiscal Studies was "the most striking example" of this.
Those who have served as Directors of the IFS are:
Notable former members of staff of the IFS include Evan Davis and Stephanie Flanders (BBC journalists), Chris Giles (Financial Times Economics Editor), Tom Clark (Guardian columnist), Steve Webb (Liberal Democrat Pensions Minister) and Rupert Harrison (Chief of Staff to former Chancellor George Osborne).
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