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Adam Smith InstituteAdam Smith Institute

Sam Bowman, Deputy Director:

“The biggest story in today’s budget was not any of the measures announced but the extraordinary strength of the UK economy. Employment is now at the highest level and rate in history and, although productivity growth is still depressingly low, the economy appears to be very healthy overall. Those economists who predicted at the start of this Parliament that spending cuts would lead to mass unemployment should take a lesson from this. Financial markets have been quiet and government borrowing is extremely cheap, a sign that the government still has the confidence of the markets on long-term deficit reduction. Any doomsayers about the UK’s fiscal position are going against the collective judgment of the people who actually have money on the line.”

“The best policies were ones we already knew about – raising the personal allowance will leave more money in full-time workers’ pockets, and is a good tax cut for people on low and middle incomes. Most of corporation tax falls on workers’ wages so the cut to that should boost wages, with the remainder coming off investment. Raising the upper-rate threshold and cutting alcohol duty are also both welcome moves.”

“This budget was filled with fiddly splurges on things like the church roof repair fund, and giving Libor fines to military charities is just bizarre, but thankfully most were triflingly small. The most depressing big announcement was the ‘Help to Buy ISA’, which will subsidise first-time buyers’ savings pots. This will stoke up demand even more in a housing market that is suffering from insufficient supply. Throwing more money at the demand side will not solve the housing crisis – the country needs planning reform so that it is easier to build on Green Belt land. The only thing this policy will Help to Buy is the election. Overall, this was not the giveaway budget that some had hoped for – or feared. With all of the tiny changes in this, it looks like Osborne is fiddling while the economy booms.”

tpalogoTaxPayers’ Alliance

Jonathan Isaby, Chief Executive:

“Not for the first time, the Chancellor has delivered a mixed bag of measures while glossing over the shocking state of the public finances. There were far too many politically motivated commitments designed for easy headlines, when the challenge is not to spend money in marginal constituencies but to save it. However, taxpayers will welcome the package of tax cuts on income, duties and savings which will leave more money in people’s pockets and reduce the cost of living. It is economic lunacy to stoke up demand in the housing market with taxpayers’ money, when the problem is restrictive planning laws strangling supply and pushing up house prices.”

“The Chancellor shows some cheek to claim he is correcting the mistakes of his predecessors [on debt], when he has presided over a huge explosion in the national debt to more than £1.4 trillion. The Chancellor delivered some good news on Income Tax, with tax cuts for the lowest paid and long-overdue relief for ordinary people being clobbered by the higher rate. Leaving more of people’s money in their own pockets is the best way to promote economic growth and long-term prosperity, and it’s morally right too.”

“We should never forget that taxes are the biggest cost of living, so the decision to cut taxes on a well-earned drink and cancelling the rise in Fuel Duty are welcome relief for families struggling on tight budgets. Merging main and small business Corporation Tax and abolishing the weekly “Class 2″ National Insurance payments for the self-employed are both welcome measures that the TaxPayers’ Alliance has long campaigned for. Scrapping traditional self assessment could also help make tax easier to administrate for millions, but taxpayers will be concerned about the possibility of yet another government IT disaster. Scrapping petty rules on ISA withdrawals, the 10 per cent savings rate and punitive rates on pension pot withdrawals will help encourage people to save more. But while these tweaks may be good news, the real obstacle to the higher savings and investment we need are the overall levels of tax and spending which both remain far too high.”

IoDLogoInstitute of Directors

Simon Walker, Director General:

“This was a solid and responsible budget. Few Chancellors would be able to resist the temptation to binge on a £22bn windfall from the sale of bank shares this close to an election. By using it to pay down our national debt George Osborne has shown commendable discipline.”

“Whilst some may have expected more rabbits from the hat, today’s employment figures and the revised OBR growth forecasts prove there’s definitely something of the Duracell bunny to Britain’s economic recovery. This is a testament to this Government’s support for enterprise but, more importantly, it is evidence of the tenacity and resilience of UK businesses.”

institute_economic_affairsInstitute of Economic Affairs

Mark Littlewood, Director General:

“The British taxpayer is paying the price for George Osborne’s failure to balance the budget over this Parliament. The deficit may be falling, but it is doing so at a snail’s pace and the plan is still to increase the public debt by over £120bn in the coming years before the government starts living within its means. The consequence of the coalition failing to exercise spending restraint is that our tax burden remains far too high. No doubt, a few years ago, the Chancellor was hoping he could offer some dramatic tax reductions before polling day. There were some crumbs of comfort here, but nothing to truly merit enthusiastic cheers.”

“It is the failure to properly tackle the deficit that has left the Chancellor with so little room for manoeuvre on much-needed tax cuts. This Budget gave us simplification of tax collection but featured nothing to address the complexity of the UK tax system. The array of tinkering, fiddly tax changes announced today will do little to encourage a more coherent system. It’s a shame that politicians don’t seem to understand that simpler, lower taxes are the best measures to ensure our prosperity.”

“The above inflation rise of the threshold for the 40p rate of income tax is long overdue, bringing welcome relief for millions of middle earners. Politicians should continue to raise this threshold to begin to compensate for years of under-indexing.”

“It’s great news the Chancellor is liberalising the sale of annuities and improving the flexibility of ISA products. Less positive is the economically illiterate introduction of a ‘Help to Buy ISA’ which will serve to increase demand in a housing market characterised by scarce supply. What we really need to help everyone struggling with the high price of housing is planning liberalisation to allow more building and reduce housing costs for ordinary people.”

CPS logoCentre for Policy Studies

“The Chancellor needed to restate his commitment to the deficit reduction programme as well as outline further measures to boost living standards. Despite a few distractions, he largely achieved both tasks. The OBR’s latest forecasts for growth and unemployment all show positive revisions. Importantly, total debt as a percentage of GDP is now on the verge of falling with borrowing falling every year in the next Parliament. A reduction in the expected surplus in 2019/20 from £23 billion to £7 billion means that public spending will be 36 per cent of GDP which is still higher than when Gordon Brown was Chancellor in 2000.”

“…The most impressive policies announced by the Chancellor will be for savers – who of course have a higher propensity to vote. However, extending pension freedoms to five million pensioners with annuities is a bold move. In addition, significantly increasing the flexibility of ISAs along with new personal savings allowances and other announced measures will make saving easier and cheaper. As well as winning votes, the Chancellor’s proposals in this area should help to create a more powerful culture of saving and personal responsibility.

There are some issues of concern such as the significant increase in public spending in 2019/20 implied in the OBR’s new forecasts. Also, the UK’s current account deficit remains precarious and given the OBR’s downgrades of global and Eurozone growth, more measures to boost exports for example with bigger cuts to Air Passenger Duty would have been desirable. In addition, day to day spending in the Foreign and Commonwealth Office is due to be cut by 35 per cent next year which means that international aid spending will be almost 8 times higher. Nevertheless, by pointing out that deficit reduction in this Parliament has come alongside improvements in public service quality, falls in crime and falling child poverty, the Chancellor restated the case for balancing the budget. Whilst there is more that he could have done on productivity and exports, most of the measures he announced should be welcomed.”

6 comments for: The Budget: Think tank reaction round-up

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