Research

Autumn Statement Briefing 2015


SUGGESTED

Economic Theory

An introduction to the ideas of Ronald Coase

Healthcare

Political short-termism trumping best practice in the NHS

Housing and Planning

All government spending should come under the microscope

https://iea.org.uk/wp-content/uploads/2016/07/IEA Autumn Statement Briefing 2015.pdf
Summary:

Government spending

  • The government’s Spending Review will be far from comprehensive. With the triple-lock for state pension increases and NHS, per-pupil funding for schools, international aid and the defence budget all protected, the overwhelming majority of government spending has been ring-fenced from cuts.

  • Rather than salami-slicing remaining departmental budgets to hit arbitrary savings targets, the government should rethink its functions from first principles.

  • The spending review should take account of changing demand patterns and relative prices in certain sectors and should not maintain arbitrary targets for spending as a percentage of national income in others. It should take into account the long-term effects of ageing on health and pensions spending. Capital spending decisions should prioritise projects with the highest economic return.


The tax credits fiasco

  • The government’s proposed tax credit changes should be abandoned. They significantly increase marginal tax rates for the low-paid. Delaying implementation or other minor changes to the reforms will not change this.

  • Instead, the government should overhaul the system. It should replace tax credits with a negative income tax based on household income with the amount of tax-free income based on tax allowances which would be transferable within households. This would end the discrimination against family formation inherent within the current system. Consideration should be given to increasing the conditionality of benefits with more stringent work requirements.


The tax system

  • The Autumn Statement should make plans to simplify the tax system and make it more economically rational. The government should not put forward changes to the system of pension tax relief except that the tax-free lump sum should be abolished or severely restricted. Property taxation should be completely overhauled, with the long-term aim of abolishing council tax, business rates and stamp duty, and replacing them with a Land Value Tax on commercial land and a tax on imputed rent for residential property.

  • Personal tax thresholds should rise by the higher of inflation or earnings growth in the coming years after a number of years of under-indexation. Further increases in tax thresholds at the lower end should focus on raising the starting threshold for national insurance contributions. The withdrawal of the personal allowance above £100,000 should be abolished as should the higher rate of income tax.

  • The VAT base should be broadened to include VAT at the full rate on domestic energy consumption. Other extensions of the VAT base should be implemented in the long run. This change and the restricting of the tax-free lump sum for pensions would facilitate all the tax reductions above plus a number of measures that would considerably simplify the tax system.


Decentralisation

  • The government should be ambitious in its fiscal decentralisation agenda. But rather than ad-hoc City Deals powers for spending, revenue raising and regulation should be devolved to all local authorities.


Read the press release here.

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Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.


Head of Public Policy and Director, Paragon Initiative

Ryan Bourne is Head of Public Policy at the IEA and Director of The Paragon Initiative. Ryan was educated at Magdalene College, Cambridge where he achieved a double-first in Economics at undergraduate level and later an MPhil qualification. Prior to joining the IEA, Ryan worked for a year at the economic consultancy firm Frontier Economics on competition and public policy issues. After leaving Frontier in 2010, Ryan joined the Centre for Policy Studies think tank in Westminster, first as an Economics Researcher and subsequently as Head of Economic Research. There, he was responsible for writing, editing and commissioning economic reports across a broad range of areas, as well as organisation of economic-themed events and roundtables. Ryan appears regularly in the national media, including writing for The Times, the Daily Telegraph, ConservativeHome and Spectator Coffee House, and appearing on broadcast, including BBC News, Newsnight, Sky News, Jeff Randall Live, Reuters and LBC radio. He is currently a weekly columnist for CityAM.



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