“Overall, this was another high spending Budget from a government which continues to use most of its available headroom to increase expenditure rather than to cut taxes. The eye-watering national debt will continue to grow in cash terms – even if it falls modestly as a proportion of national income – because there is no plan to run a budget surplus in the coming years.
“There were some positive elements to the Budget. Reducing the universal credit taper rate will result in many people keeping more of what they earn and will help to incentivise work. The wide-ranging reform to alcohol duties is a very welcome step in rationalising and simplifying this part of the tax code. But in other areas, the Chancellor has made our over-complicated tax rulebook still more impenetrable.
“His new Charter for Budget Responsibility sounds good – but one wonders whether it will be abandoned at the first sign of political difficulty, which has been the fate of previous fiscal rules of this type.
“The Chancellor is banking on strong economic growth to sustain the many additional billions of pounds of spending he has pledged. However, in the absence of meaningful tax cuts and deregulation, and with state spending as a share of GDP at near record-levels, it is entirely possible that our post-Covid recovery will be rather more sluggish than the OBR’s upbeat numbers would indicate.”
Commenting on changes to business rates, IEA Editorial and Research Fellow Professor Len Shackleton said:
“The Chancellor recognises that business rates need fundamental reform, but as yet there is no clear view about how he plans to do this. The temporary relief, though welcome to many businesses, should not mean delay in reform. Sticking plaster solutions inevitably throw up anomalies and unfairnesses, where certain types of businesses don’t get the benefit while others that don’t need it do. A long-term solution must be in place before this new relief expires.”
On public sector pay, Professor Len Shackleton said:
“We are not much the wiser about how public sector pay will be determined over the next few years. Any significant increase must be tied wherever possible to productivity improvements, to reductions in the scale of government, and to the end of national bargaining – but this seems unlikely.”
Notes to editors
Contact: Emily Carver, Head of Media, 07715942731
IEA spokespeople are available for interview and further comment.
Read our latest report The Great British Rake-Off on the unreported cost of public sector pensions here.