They’re all in cahoots with each other, I tell you! Not one but three centre-right think tanks refer to “missed opportunities” in their responses to the Budget today. First up, is Jonathan Isaby of the Taxpayers’ Alliance:
“The Chancellor has announced some welcome relief for taxpayers struggling with stretched budgets. Measures such as the higher personal allowance, the freeze in fuel duty, and abolition of the alcohol duty escalator will all ease the burden on hard-pressed families. It’s also good to see savers finally being rewarded after being overlooked for too long by successive governments.
However, George Osborne has no room for complacency. His failure to reform Stamp Duty is a missed opportunity and it is deeply regrettable that yet more taxpayers are likely to be dragged into the 40p Income Tax band.”
And then it’s Mark Littlewood of the Institute of Economic Affairs:
“This Budget was a missed opportunity to tackle the inequity of millions of earners being dragged into the 40p rate. Under George Osborne nearly 1.5 million more taxpayers are paying this rate. This is an attack on aspiration and entrepreneurship. Whilst the increase in the personal allowance is a welcome move, it should not have come at the expense of tax cuts in other areas.
The government should have announced above inflation increases in the thresholds for inheritance tax, stamp duty and the higher rate of income tax to begin to compensate for years – or decades – of under-indexing. This could have been financed by the reversal of misguided spending commitments on childcare and also by not reducing the starting rate of tax for savers.”
Followed by the Adam Smith Institute:
“The most obvious missed opportunity was the lack of any additional cut to Corporation Tax. Adam Smith Institute research has found that nearly 60% of the Corporation Tax comes out of workers’ wages, with the rest acting as a harmful tax on capital. The Chancellor could have boosted wages and stimulated the economy by cutting Corporation Tax even more, killing two birds with one stone.”
Reform’s Cathy Corrie also raises another missed opportunity, without quite using those words:
“The cap on AME spending is undoubtedly a step in the right direction. Yet today he confirmed that the state pension will be excluded. This means that almost half of all UK benefit spending will remain outside the cap. The AME cap will be key to opening up a debate about the cost of welfare that many politicians have been reluctant to engage with, but the exclusion of the state pension, much like the refusal to expose NHS spending to the pressure of budget cuts, is symptomatic of a broader failure to address entitlement reform.”
That said, it’s not all bellyaching: Osborne’s pension reforms are widely praised. Here’s the Adam Smith Institute again, specifically their Director Eamonn Butler:
“At last Britain’s private pension savers will be treated like responsible adults. As lifetimes have lengthened and financial uncertainty has abounded, annuity rates have fallen, leaving savers much worse off then they expected. The rule has long been that, apart from a proportion that can be taken as a lump sum on retirement, pensioners have had to convert their retirement pot into an annuity, paying them a lifetime income. But as lifetimes have lengthened and financial uncertainty has abounded, annuity rates have fallen, leaving savers much worse off then they expected.
From April 2015, retirees will be able to access their pension savings pretty much as they wish. Instead of being hit by a 55% tax if they took out ‘too much’, ordinary rates of tax will apply. So it all becomes much easier. You build up a pension pot while you work; on retirement, you can take 25% of that tax-free (a provision designed to help people with moving costs and other changes on retirement); then you can decide whether you will buy an annuity, draw down the pot at a set rate, or withdraw the whole sum, facing tax only at the prevailing marginal rate.
Most people are perfectly capable of managing their retirement income and do not want to fall back on the state anyway. The new rules recognise that. On the rare occasions when governments treat us like adults, they should be encouraged.”
The IoD’s Malcolm Small reckons:
“This is the most radical reform to the pension savings architecture in decades and has been long overdue.”
To which the same organisation’s director, Simon Walker, adds that this Budget is “responsible and imaginative,” and will “promote growth, exports and investment”.
And then the Centre for Policy Studies goes all out, calling it a “welcome and Thatcherite Budget… at times”:
“Today the Chancellor needed to carry out pro-growth supply side reforms as well as ease the burden on lower and middle income households whilst keeping to the programme of deficit reduction. To a surprisingly large extent, because of the radical savings and pension reform, more income tax cuts and boost to exports, this Budget broadly achieves these aims. Estimates for cyclically adjusted net borrowing are higher and more radical reforms would have been desirable but many of the measures announced in this Budget are welcome.”
For more reaction – including from some other think tank types – there’s our special Budget panel.