Adam Smith Institute
Sam Bowman, Executive Director:
“This is the right decision on tax credits, and we applaud the Chancellor for changing his mind. Tax credits are the right way of doing welfare, encouraging people into work and topping up the incomes of the working poor. But now that they have been protected, we should reform the system by making it less complex and automatic, just as PAYE taxation is run.”
Ben Southwood, Head of Research:
“Finally—the government is taking localism and devolution seriously. Northern Ireland has needed control of its corporation tax rate for years—otherwise business simply flees across the border to the Republic where rates are 12.5%—and this move has been long-awaited. But the bigger change is giving local authorities and metropolitan areas control of business rates, and more importantly the revenue they generate.”
Institute for Government
“The Chancellor today announced a much smaller squeeze on departmental spending plans than he indicated in his July Budget. But despite the reduced scale of cuts in the immediate future, there are still big challenges in implementation if the plans are to be achieved. There is a lot of stress on digitalising government with the ambition that by 2020 people will have the option to pay online for every central government service. Funding has been increased to support these ambitious plans. Transformation will, however, require Whitehall to work in new ways as well as managing with many fewer civil servants.”
“The other striking feature of the statement is the big changes to local government financing. The increased powers for councils are being accompanied by increased financial responsibilities which are likely to result in higher council taxes.”
TaxPayers’ Alliance
Jonathan Isaby, Chief Executive:
“When public spending is going up year after year, how can anyone describe that as austerity? It’s good news that the Chancellor intends to run a surplus by the end of the parliament. However, the Spending Review was a big missed opportunity to not only reduce spending, but to re-think the role of government by scrapping unnecessary departments and functions altogether. As well as significant u-turns on tax credits and reductions to the policing budget the Spending Review seemed to offer extra spending for areas like sports, the arts and foreign aid, so it is hard to see where the Chancellor aims to make the big savings needed to ease the burden on taxpayers. What’s more, fiddly interventions to the housing market and a new payroll tax mean that Whitehall’s tentacles will continue to stretch far and wide, despite spending coming down as a proportion of national income.”
Institute of Directors
Simon Walker, Director General:
“Businesses see strong public finances as the basis for sustainable economic growth, and will welcome Osborne’s confirmation today that he aims to run a budget surplus by the end of the Parliament. The Chancellor was dealt a remarkably strong hand by the Office of Budget Responsibility, which is predicting stronger growth, lower than expected borrowing costs and significantly higher tax receipts. He’s chosen to play this hand with more spending than expected.”
“Although departmental budgets outside the ringfence are seeing significant reductions in expenditure, overall the Chancellor will continue to preside over a rising real terms budget this Parliament. There will be plenty of complaints about individual cuts, but it’s important to remember that total debt will still be colossal.”
Confederation of British Industry
Carolyn Fairbairn, Director-General:
“This was a good spending review for longer-term investment in the economy but there’s a sting in the tail in the size and scope of the Apprenticeship Levy. Businesses will be pleased to see the Chancellor staying the course on deficit reduction, his commitment to an industrial strategy, and the emphasis on nurturing a vibrant business community.”
“Standouts include maintaining spending on infrastructure; ramping up housebuilding; support for energy-intensive sectors and for advanced manufacturing. Business recognises there are tough choices to be made in balancing the books, but many are reaching a tipping point, where the cumulative burden of the living wage, apprenticeship levy and business rates risk hurting competitiveness. The Apprenticeship Levy, set at 0.5%, is a significant extra payroll tax on business and by widening the net it will now catch more smaller firms. We welcome the creation of a levy board to give business a voice on how the money is spent and will work with the Government to ensure a focus on quality.”
Institute of Economic Affairs
Mark Littlewood, Director General:
“George Osborne has today made a one-way bet. His Spending Review announcements are based on two predictions: continually low interest rates and sustained strong economic growth, making our debt repayments lower than anticipated and tax revenues higher than expected. These are not unrealistic assumptions, but if either go off course, the savings announced today will not go nearly far enough.”
“The Chancellor should be applauded for his continued efforts to get the debt-to-GDP ratio back on a sustained downward trend. Yet despite all the talk of ‘savage cuts’ in this Spending Review, overall real government spending will increase by 0.3% from now to 2019/20.”
Centre for Policy Studies
Daniel Mahoney, Head of Economic Research:
“George Osborne is right to avoid increasing marginal tax rates on the low paid, so in that sense it is welcome that he’s withdrawn his tax credit plan. The commitment on police spending will also come as a relief to many in the current climate. However, it’s difficult to see at first glance how these changes will be fiscally neutral. For 2016-17, the Government’s own figures suggest that the net effect of the Autumn Statement will be a loss £2 billion to the Exchequer…”
“While it is disappointing to see Osborne recommit to ring-fencing, particularly on the triple-lock and international aid, this was to be expected. On a more positive note, Osborne’s emphasis on house-building is welcome. 400,000 additional homes, new planning reforms to boost construction and releasing public land for building could help tackle Britain’s chronic housing problem.”