Politicians in Britain live in mortal fear of Robert Chote. Gordon Brown nurtured a simmering hatred for the director of the Institute for Fiscal Studies, fulminating when the thinktank passed judgment on the state of the public finances or Labour's patchy progress in its fight to eradicate child poverty. As things stand, Chote is unlikely to be top of the Christmas card list for George Osborne or Nick Clegg either.

The reason is that the IFS has now had the chance to do the number crunching on every jot and tittle of Osborne's emergency budget back in June, including changes to housing benefit, disability allowances and tax credits. Its conclusion is bad news for Osborne and even worse news for Clegg. Far from showing that "we are all in this together" (Osborne) or being an example of "progressive austerity" (Clegg), the IFS concluded that the budget was "clearly regressive". The poorest 10% of households will lose 5% of their income as a result of all the changes to come between now and 2014, while the top 10% will lose less than 1%.

To the extent that the rich do lose out over the coming years, it will be because of changes bequeathed by Alistair Darling when he was chancellor. Indeed, Labour tended to play down just how progressive its budgets were, while the coalition has bragged on, falsely, about its commitment to fairness. As the IFS makes plain, the big losers from the budget will be poor working families with children and those dependent on state benefits: the same people, in other words, who lost out in the Thatcher budgets of the 1980s.

For Labour, the IFS report is a godsend. They have used it to give the government – and Clegg in particular – a good kicking, which is what it deserves. This paper advised readers to back Clegg in the general election on the grounds that this was a Liberal Democrat moment. It is safe to say that this "Liberal Democrat moment" did not involve abandoning Keynesian economics, or a budget in which the poorest families lose more than those on upper-middle incomes, not just as a proportion of income but in straight cash terms.

For years, Lib Dems have banged on about how the two architects of postwar Labour Britain – Keynes and Beveridge – were both Liberals. One can only imagine what those 20th-century giants would say about policies that increase unemployment, unravel the welfare state, hit the poor harder than the rich, and provide political cover for a rightwing government intent on turning the clock back to the early 80s.

So, if those Lib Dems who take pride in being on the progressive wing of politics find the IFS assessment uncomfortable reading, then tough; they need to feel bad about the policies they are backing. And they had better prepare for a lot more ordure when the austerity policies really bite next year. They should also be worried about the US economy, which – unencumbered by budget cuts – is on the brink of a double-dip recession.

All that said, however, Labour needs to offer more than Clegg-bashing. One feature of the post-election landscape is that voters seem to believe the coalition's argument that there is no alternative to immediate fiscal belt-tightening.

Labour's history shows the importance of a simple message to express the need for change. In 1945 the economic argument was that interventionist policies were needed to deliver full employment and social justice. The political message was that Britain had not fought a world war just to return to the 1930s.

In 1964 Harold Wilson's thought the UK could match the growth in continental Europe only if it embraced science, technology and planning. His message was one of modernity: Labour was the party of the Beatles; the Tories were the party of the grouse moors. In 1997 New Labour's economic case was that the fruits of the market could be distributed more evenly. The political message was youthful hope versus cynicism.

Indeed, the only postwar election that Labour won without a clear political pitch was in 1974, when the National Union of Mineworkers and Opec did for Ted Heath. Of course, it is perfectly possible that the coalition will find the going as tough as Heath did. There are all sorts of potential economic nasties out there, such as an aborted economic recovery leading to deflation and a second, more severe, financial crisis.

However, Labour would be unwise to assume that power is going to fall into its lap. The party's problem in May was New Labour ideological baggage encumbering its interventionist message. Many voted for Clegg because they thought the Lib Dems were the radical left-of-centre option, and it would be easy – and pleasurable – for Labour to highlight this egregious folly. But the folly would be Labour's if it saw this as a substitute for a social democratic narrative that makes more sense to voters than the coalition's unpleasant cocktail of born-again monetarism and regressive social policies.