Conservative Way Forward

Paul Abbott, Chief Executive:

CWF“This was a Robin Hood Budget, rewarding work and helping people on modest incomes the most. Ultimately it was a Budget that made me proud to be a Conservative. The Chancellor has roundly delivered – thank God! – on the promise of our general election campaign: a stronger and more competitive economy, a plan for the future, and a better life for you and your family. I was encouraged to see aggressively lower taxes for British business and the reductions in income tax, but balanced with help for the poorest in society: a National Living Wage; a freeze in fuel duty; investment in our Northern cities and roads; and compassionate policies to help our NHS and pensioners who are struggling. The Chancellor’s joke about “planes over West London” was well-judged too: we do need to crack on expanding airport capacity. The tax credit changes will need careful implementation. But, overall I’m delighted. The longer that George Osborne continues as Chancellor, the more assured and confident he becomes – fighting for a Conservative Party that is on the side of everyone, rather than just a few. A Budget like this will be fuel in the tank of our economy, and is a credit to the whole Treasury and Downing Street team. More please!”

Adam Smith Institute

Sam Bowman, Deputy Director:

Adam Smith Institute“The new National Living Wage is a disaster that will condemn tens of thousands of people to long-term unemployment. Almost all of the most methodologically-robust, academic studies indicate that increases in the minimum wage kill jobs. Low-skilled people, young people and ethnic minorities are the ones who are hit worst. There is also evidence to suggest that higher minimum wages slow down the creation of new jobs, particularly in sectors that employ large numbers of low-skilled workers. Firms may also respond to this by cutting back on non-monetary worker compensation like break times and sick leave, to offset their increased labour costs.”

“Britain’s experience with the minimum wage has been benign so far because the Low Pay Commission’s remit has always been to minimise job losses. It has done this admirably, restraining hikes like this. This can no longer be the case. There is no magic wand we can wave to make workers more productive. Raising the National Insurance threshold for low-income workers would have given them more take-home pay and created jobs. But that would have required spending cuts or tax rises elsewhere, so the Chancellor has taken the politically-easy way out. If the OBR’s estimates are to be believed, today the Chancellor will have put 60,000 people out of work.”

Confederation of British Industry

John Cridland, Director-General:

cbi-logo“This is a double-edged Budget for business. Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver. Firms have been unwavering in their support for the Chancellor’s deficit reduction plans and will welcome the clarity that the new fiscal rules provide. Other standout measures include making the Annual Investment Allowance permanent at £200,000, which the CBI called for, as well much-needed investment in our roads network.”

“The further reduction in corporation tax is a welcome surprise but tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the National Minimum Wage next April – a 7 per cent increase. The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6 per cent. Firms want to play their part in training up more apprentices but an apprentice levy is a blunt tool. A volunteer army is always better than conscription but the CBI will work with the Government to make the best effect of this measure.”

Institute of Directors

Simon Walker, Director General:

IoDLogo“In today’s Budget, George Osborne has offered business a new deal on employment. Introducing a national living wage at a significantly higher level than the minimum wage was a dramatic announcement, but in return, companies have been provided with a cut to corporation tax and an increase in the employment allowance. We should not understate the boldness of this move, and many businesses will have been taken by surprise, but the IoD accepts that after several years of slow wage rises, now is the time for companies to increase pay. 9 in 10 IoD members already pay even their most junior staff the living wage, and will accept this deal from the Chancellor.”

“Unfortunately, Osborne has not been quite so bold in all areas. The annual investment allowance has been fixed for five years, but at far too low a rate of £200,000. This will not help as many small and medium sized businesses to invest for the future. The 45p tax rate, which raises little, if any extra revenue, has been retained, and the 40p threshold has only nudged up very slightly to £43,000. Meanwhile, the already complex inheritance and pensions tax systems have been further complicated. This Budget was a chance for radical simplification of the tax system which has regrettably been missed.”

The Entrepreneurs Network

Philip Salter, Director:

Ten Logo_0“The introduction of the National Living Wage is a bad policy for entrepreneurs and the UK. Academic studies have found that minimum wages reduce employment and slow jobs growth, and the Low Pay Commission was set up with these problems in mind. The Government should leave the decision of what level to set any wage floors in the hands of the experts at the Low Pay Commission, so that business owners aren’t forced to sack employees if payroll costs go up too much. If the Chancellor wanted to help the low paid, he should have slashed Employers’ National Insurance, 70 per cent of which is paid for by the employees, rather than just increase the Employment Allowance from £2,000 to £3,000 a year.”

Policy Exchange

Steve Hughes, head of economics and social policy:

Policy-Exchange-logo“From a pay freeze to a pay rise, hard working Brits have been rewarded with a boost to their wages. Likewise small and large firms will benefit from cuts in corporation tax and National Insurance. The critical challenge to sustained economic growth both in terms of workers’ wages and GDP will be boosting productivity. The focus must be on attracting and retaining top quality teachers in schools around the country, investing in much needed road, rail and energy infrastructure and encouraging companies to make better use of technology.”

Jonathan Simons, head of education:

“Universities are one of the clearest winners from this budget. The elements that save government money – a switch of maintenance grants to loans and a freeze in the repayment thresholds – won’t affect them directly, and a promised inflation rise in fees if they can show excellent teaching is a long campaigned for prize. In a Budget which set out continued cuts across much of the public sector, Higher Education continues to defy gravity”.

Centre for Policy Studies

Adam Memon, Head of Economic Research:

CPS logo“There is plenty to cheer in this Budget. The Chancellor seems to have achieved his targeted cuts in the welfare budget including cuts to housing benefit and tax credits. We support measures to keep the welfare budget under control, including the introduction of a National Living Wage which will see increases in the minimum wage along with sensible age banding and further cuts in national insurance through an increase in the Employment Allowance to £3,000. Measures to reduce the tax credits bill are also important but there is a danger that this leads to even higher marginal tax rates for those on low wages. It is also to be hoped that the planning proposals due to be published on Friday will lead to increased house building and a long-term reduction in the housing benefit bill.”

“Despite a few small changes, the OBR forecasts that economic growth will remain strong over the coming year and public sector net debt will fall slightly faster than expected. It was also welcome to see the Chancellor recognising the importance of stronger productivity in increasing living standards. The profile of public spending has been smoothed out and the budget is expected to reach an absolute surplus by the end of the Parliament.”

“It is also good to see the Government continue with its programme of privatisation which will see the largest asset sales ever. The new Surplus Rule to ensure that Government’s will have to run surpluses unless real GDP growth is less than 1 per cent seems a reasonable attempt to ensure that the national debt remains on a downward trajectory.”

TaxPayers’ Alliance

Jonathan Isaby, Chief Executive:

tpalogo“This Budget was frustratingly complicated, but overall this was a tentative step in the right direction. The general focus on eradicating the deficit via spending reductions rather than tax hikes is welcome. It was as ever a political Budget from a political Chancellor and there were notable groups left immune from austerity – not least well-off pensioners – but it’s good news that this Budget will leave more of people’s own money in their own pockets.”

“Eradicating the deficit has to involve welfare reform, and tax credits have to be part of that. It is a shame the Chancellor is still unwilling, though, to take on other elements of welfare, particularly on Child Benefit and universal pensioner benefits.”

“Companies don’t pay taxes, people do. They fall on the heads of individuals through lower wages, fewer jobs in the economy, and higher prices for the products and services those companies provide. Cutting Corporation Tax further is no doubt a brave move but it is one that is most welcome.”

“The Chancellor should be congratulated on going further and faster to take action on [income tax] thresholds, even if he could have been more ambitious. The increase in the Personal Allowance will help all taxpayers, though more action is needed to merge National Insurance with Income Tax thresholds. Moving up the point at which the 40p rate kicks in is well overdue, as this rate designed for higher earners has hit more and more people in recent years thanks to inflation and resulting fiscal drag.”

“As house prices have increased, frozen thresholds have meant more families have been dragged into paying this unfair and immoral tax. The Chancellor is right to increase the thresholds, but it is regrettable that the changes have introduced added complexity in the system. The next step should be the complete abolition of this unpopular levy.”

Institute of Economic Affairs

Mark Littlewood, Director General:

institute_economic_affairs“The decision to introduce the National Living Wage is intellectually bankrupt. Almost a fifth of workers will now see their hourly rate of pay determined by a government quango. The reform is based on the idea that tax credits currently subsidise employers. There is scant evidence for this. The government has changed the remit of the Low Pay Commission to target inequality rather than set a wage floor. The Commission should be renamed accordingly. The ease with which the Chancellor glossed over the problems which will be faced by more than 60,000 people in seeking gainful employment was frightening. These are often the most low skilled and vulnerable in society. The new name for this wage setting policy will mean that changes to the rate will always be judged against the Living Wage campaign. Instead of companies setting wages according to work done by their employees, they will now face increased pressure to compensate workers for high rents and high energy costs often driven by misguided government policies.”

“George Osborne deserves credit for taking an economically sound and responsible position on the necessity of balancing the books, yet cutting the deficit at the same rate as during the last Parliament is a modest policy. Given the fiscal headwinds of our ageing population, without significant changes to spending levels, huge sacrifices will have to be made by future generations either through significantly higher taxes or reduced benefits.”