Response to the 2014 Budget
“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.
“Aside from representing catch up for the appalling fiscal drag of the last decade, it would send out the signal that the government is a friend of both economic growth and aspiration.”
“Increased flexibility through the removal of restrictions on access to pension pots is a welcome reform but, rather than reducing the 10p starting rate of tax for savings income, the Chancellor should have abolished the concept of a special tax rate altogether. Such gimmicks create unnecessary complexity in the system. The creation of Pensioners’ Bonds is bad for taxpayers and bad for businesses who have to compete against governments for capital. The government should not be borrowing at above-market rates of interest.”
“The choices ahead for the UK are bleak. The Chancellor is ignoring the substantial burden of the country’s implicit debt in the form of unfunded social security commitments as the population ages. To create the conditions for long-term economic stability, politicians must urgently review not only the scale of state spending but also the scope of government. The maintenance, yet again, of a ring-fence around areas such as education, health and foreign aid is deeply disappointing, whilst the “triple lock” on pensions is arguably reckless.”
“The government is trying to create growth and tackle living costs in the wrong way. It is not the job of politicians to rebalance the economy. Bizarrely, the government seems to be using the budget to “pick losers” by raising levies on fast-growing Fixed Odds Betting Terminals and lowering them on bingo. Much of its policy with regard to energy costs, merely partially undoes the damage of other government policies in the same area. The government would be best placed pursuing a genuinely deregulatory agenda that unleashes the private sector.
“With regard to childcare, instead of pursuing policies that subsidise the high cost of living, politicians should instead embrace policies that bring costs down.”
Notes to Editors:
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Last week the IEA published its Submission to the Budget, outlining its recommendations to the Chancellor. Download it here.
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