To inform public debate on economics, via establishment of rigorous independent research, in order to promote the development of effective fiscal policy.
The institute's stated 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.[6]
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).[5] In 1964, the then Chancellor of the ExchequerJames 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".[7] 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 advisers had three or four months for second thoughts and, recognising some of the dire consequences, would modify their original proposals."[7] 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."[7]
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 stated 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."[7] 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".[7]
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.[8] 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).[7] 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."[5] 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.[9] In 1994, the Tax Law Review Committee was established.[10]
Research
Areas of research covered by the institute include public finance and spending, pensions and saving, company taxation, consumer behaviour and poverty and inequality.[11] 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.[12]
The institute is home to – or a partner in – the following research centres (some of which are described further, in following sections):
Centre for the Microeconomic Analysis of Public Policy (CPP)
Centre for the Evaluation of Development Policies (EDePo)
Centre for Microdata Methods and Practice (cemmap)
Centre for Tax Analysis in Developing Countries (TaxDev)
formerly Programme Evaluation for Policy Analysis (PEPA)
Centre for the Microeconomic Analysis of Public Policy
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).[9] The CPP has had Institute status since 2020.[13] It is directed by Professor Imran Rasul, and co-directors Professor Richard Blundell, Professor James Banks, Professor Eric French, Professor Rachel Griffith and Professor Fabien Postel-Vinay.[9]
The CPP carries out microeconomic analysis of major public policy issues, including productivity growth, poverty reduction, promoting employment and ensuring sound public finances.[9] Its focus is on the modelling of individual, household and firm behaviour. Between 1991 and 2020, CPP was directed by Richard Blundell.
Centre for Microdata Methods and Practice
The institute hosts the Centre for Microdata Methods and Practice (Cemmap), a joint venture between the institute and the UCL Department of Economics.[14] Cemmap's activities include:
conducting research and organising conferences, symposia, workshops and training courses;
developing and applying methods for modelling individual behaviour, the influences on it and the impact of policy interventions; and
maintaining an extensive network of fellows in the UK and abroad.[14]
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.[14]
Cemmap was founded in 2000 with a grant from the Leverhulme Trust and since 2007 has been an ESRC research centre.[14]
Publications
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.[15] 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.[16]
Another noteworthy publication is the Mirrlees Review, which was published in September 2011.[17] 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.
Criticism
The institute frequently speaks out on politically important issues. In October 2010, Deputy Prime Minister Nick Clegg accused the IFS of using methods that were "distorted and a complete nonsense",[18] after it challenged government claims that tax and benefit reforms in the June 2010 Budget were "progressive".[19]
Concern is sometimes expressed regarding the sources of the institute's funding. In October 2010 an Early Day Motion in Parliament pointed out that "95 per cent. of [its] 5.1 million funding comes from so-called research grant contracts, details of which are not itemised in its accounts; [...] that the vast majority of its official funding bodies are Government departments, the wider public sector, the European Commission and publicly-funded organisations, notably including the BBC, H M Treasury, the Department for Work and Pensions, the Government Equalities Office, the Department for International Development, the Department of Health, the Department for Business, Innovation and Skills, the Department for Education, the Department of Finance and Personnel for Northern Ireland, HM Revenue and Customs, the Food Standards Agency, the International Monetary Fund, the Low Pay Commission and the Office for National Statistics; [and] that the Institute for Fiscal Studies recently received a substantial part of its core funding from the Economic and Social Research Council, which is ultimately funded by the Department for Business, Innovation and Skills...".[20]
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 said the IFS was 'embedded in all the normal, standard pro-market assumptions that dominate conventional economic thinking in the UK and elsewhere'."[5] 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."[21]
In July 2011, The Spectator published an article 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.[22]
A week before the manifesto analysis for the 2019 UK general election was released, economist John Weeks commented that while the institute had no links to political groups, it had an inherent bias in its judgement criteria that "favour[ed] accounting balance over social outcome", saying that an IFS analysis cannot tell the public "whether a policy is a good idea, only whether the numbers add up."[23]
The Institute for Fiscal Studies receives funding from various sources, such as the Economic and Social Research Council, international organisations and other non-profits.[25]
It has been rated as 'highly transparent' in its funding by Transparify[26] and has been a given a A grade for funding transparency by Who Funds You?.[27]
James Joseph Heckman is an American economist and Nobel laureate who serves as the Henry Schultz Distinguished Service Professor in Economics at the University of Chicago, where he is also a professor at the College, a professor at the Harris School of Public Policy, Director of the Center for the Economics of Human Development (CEHD), and Co-Director of Human Capital and Economic Opportunity (HCEO) Global Working Group. He is also a professor of law at the Law School, a senior research fellow at the American Bar Foundation, and a research associate at the NBER. He received the John Bates Clark Medal in 1983, and the Nobel Memorial Prize in Economic Sciences in 2000, which he shared with Daniel McFadden. He is known principally for his pioneering work in econometrics and microeconomics.
The Institute for Public Policy Research (IPPR) is a progressive think tank based in London. It was founded in 1988 by Lord Hollick and Lord Eatwell, and is an independent registered charity. The think tank aims to maintain the momentum of progressive thought in the United Kingdom through well-researched and clearly argued policy analysis, reports, and publications; as well as a high media profile.
The Centre for Policy Studies (CPS) is a centre-right think tank and advocacy group in the United Kingdom. Its goal is to promote coherent and practical policies based on its founding principles of: free markets, "small state," low tax, national independence, self determination and responsibility. While being independent, the centre has historical links to the Conservative Party.
The Adam Smith Institute (ASI) is a UK-based neoliberal think tank and lobbying group, named after Adam Smith, a Scottish moral philosopher and classical economist. The Institute advocates free market and classical liberal ideas, primarily via the formation of policy options with regard to public choice theory, which political decision makers seek to develop upon. ASI President Madsen Pirie has sought to describe the activity of the organisation as "[w]e propose things which people regard as being on the edge of lunacy. The next thing you know, they're on the edge of policy".
The Nuffield Foundation is a charitable trust established in 1943 by William Morris, Lord Nuffield, the founder of Morris Motors Ltd. It aims to improve social well-being by funding research and innovation projects in education and social policy, and building research capacity in science and social science. Its current chief executive is Tim Gardam.
Sir Richard William Blundell CBE FBA is a British economist and econometrician.
The Economic and Social Research Council (ESRC), formerly the Social Science Research Council (SSRC), is part of UK Research and Innovation (UKRI). UKRI is a non-departmental public body (NDPB) funded by the UK government. ESRC provides funding and support for research and training in the social sciences. It is the UK's largest organisation for funding research on economic and social issues.
Orazio Attanasio is an Italian economist and the Cowles Professor of Economics at Yale University. He was the Jeremy Bentham Chair of Economics at University College London. He graduated from the University of Bologna in 1982 and London School of Economics in 1988. He then went to teach at Stanford and was a National Fellow at Stanford's Hoover Institution and a visiting professor at the University of Chicago before arriving at University College London. Currently he is also a research director at the Institute for Fiscal Studies (IFS) in London, co-director of the Centre for the Evaluation of Development Policies at the Institute for Fiscal Studies, and a director of the ESRC Centre for the Microeconomic Analysis of Public Policy.
Soumaya Anne Keynes is a British journalist, economist, and current economics columnist at the Financial Times.
The Office for Budget Responsibility (OBR) is a non-departmental public body funded by the UK Treasury, that the UK government established to provide independent economic forecasts and independent analysis of the public finances. It was formally created in May 2010 following the general election and was placed on a statutory footing by the Budget Responsibility and National Audit Act 2011. It is one of a growing number of official independent fiscal watchdogs around the world.
The United Kingdom government austerity programme is a fiscal policy that was adopted for a period in the early 21st century following the Great Recession. The term was used by the Coalition and Conservative governments in office from 2010 to 2019, and again during the 2021–present cost of living crisis. The two periods are separated by a stint of interventionist, Keynesian spending during the COVID-19 pandemic. The first period alone was “one of the biggest deficit reduction programmes seen in any advanced economy since World War II”, with the emphasis on shrinking the state rather than fiscal consolidation as was more common elsewhere in Europe.
The UK Data Service is the largest digital repository for quantitative and qualitative social science and humanities research data in the United Kingdom. The organisation is funded by the UK government through the Economic and Social Research Council and is led by the UK Data Archive at the University of Essex, in partnership with other universities.
John Chown is a monetary economist in the United Kingdom who made his career as an international tax specialist with particular reference to currency and financial markets. Since retiring from Chown Dewhurst LLP he has remained very active, taking part in discussions on public policy issues with special reference to the development of capital markets and encouragement of inward investment into transitional and emerging economies, the future of the Eurozone, and advising on. He also works closely with a group advising on the financing of high-tech, `disruptive’ start-ups.
Richard Disney is an economist. He is a Research Fellow at the Institute for Fiscal Studies, a Visiting Professor in the Department of Economics at University College, London, a Research Associate at the Centre for Economic Performance at the London School of Economics and was a part-time Professor of Economics at the University of Sussex, now Emeritus.
Alan Stewart Duncan is a British economist and econometrician.
The Centre for Economic Performance (CEP) is an interdisciplinary research centre at the London School of Economics dedicated to the study of economic growth and effective ways to create a fair, inclusive and sustainable society. Currently led by Prof. Stephen Machin, it is one of the world's most prestigious economic research institutes, being the most important economic research institute in the United Kingdom, jointly with the Centre for Economic Policy Research. Its research performance has been particularly strong in the research areas of labour economics, productivity, happiness economics, human capital, the knowledge economy, ICT, innovation, education, and European microeconomic issues.
Dame Rachel Susan Griffith is a British-American academic and educator. She is professor of economics at the University of Manchester and a research director at the Institute for Fiscal Studies.
The UCL Department of Economics is one of nine Departments and Institutes within the Faculty of Social and Historical Sciences at University College London. It is the oldest department of economics in England and is research-intensive, currently headed by Professor Antonio Guarino.
The Mirlees Review was a comprehensive review of the UK tax system undertaken in 2010, chaired by the Nobel laureate Sir James Mirrlees for the Institute for Fiscal Studies. The findings were launched in November 2010 and were published by Oxford University Press in two volumes. The report argued that it was possible for governments to raise the same revenues at significantly lower cost than the current system of taxation and submitted recommendations to support this notion.
Stephen Douglas McKay is a British academic and since 2013 the first Distinguished Professor of Social Research at the University of Lincoln. McKay is one of Britain's foremost social policy researchers, his work having helped to redefine how poverty is measured.
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