A sensible but unambitious Budget
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“This was a fiscally neutral Budget, but deficit elimination is now being done wholly by growth, not by savings. The Chancellor yet again said the right things about the need for fiscal discipline, yet despite savings in some areas, public spending continues to climb in cash terms and is little changed from 2010 in real terms. And whilst it’s right to continue to cut the budget deficit, the bigger issue is the overall levels of government spending and taxation – which are both still far too high.
“Broadly this was a sensible Budget which did not wildly overstep its remit of tax and fiscal announcements. Yet the Government is still lacking the gumption for some radical, big decisions on the size of the state. With an ageing population, these decisions cannot be put off forever. And while we’ve seen a levelling of the playing field today in moves to align tax rates and on a wider range of educational opportunities, the Government has again failed to tackle key issues such as intergenerational inequality.”
Commenting on business rates, Julian Jessop, Chief Economist at the Institute of Economic Affairs, said:
“The Chancellor has done the right thing to provide support for small firms facing big hikes in business rates, but he is fixing a problem of the Government’s own making. In the long term, local business taxes need a fundamental review with all options on the table – including their replacement by a land value tax.”
Commenting on higher National Insurance Contributions for the self-employed, Julian Jessop, Chief Economist at the Institute of Economic Affairs, said:
“It is right that the self-employed and employed should pay similar National Insurance Contributions – the Government should not set tax rates that artificially favour one form of employment over another. However, it would have been better to level the playing field by cutting NICs for the employed rather than raising those for self-employed. NICs are a tax on jobs and wages and reducing their burden would help many lower-income households.”
Commenting on the Chancellor’s comments on social care funding, Mark Littlewood, Director General at the Institute of Economic Affairs, said:
“There has been an unreasonable stress on cutting social care budgets, but it’s a relief that the Government has ruled out tax rises to correct this. Tax-funded social care would see a stop to majority of social care that is currently provided by friends, relatives or that is self-funded.
“Yet it’s totally unjustifiable that measures such as the triple-lock on pensions and pensioner cash benefits have been maintained in the face of cuts. For too long we have given too much money to people who are old, but not always poor. This is just the beginning of a demographic crisis – the Government needs to think long and hard about the serious challenges that presents.”
Commenting on tax changes overall, Professor Philip Booth, Academic Fellow at the Institute of Economic Affairs, said:
“The main focus of any Budget should be tax policy. At 18,000 pages, the UK has one of the most complex tax codes in the world. At least Philip Hammond has avoided playing to the gallery by making complex changes to taxation for short-term political gain. However, if he wishes to be known as a successful, reforming Chancellor, he should be enacting radical changes to capital gains tax, inheritance tax, stamp duty and council tax with a view to making the tax system simpler, more coherent and more efficient.”