2014 Budget should be the last in its current format


·      Even though growth has picked up significantly in the last three quarters, the UK’s economic and fiscal challenges remain much the same.

·       A significant amount of fiscal consolidation will still be needed in the next Parliament, and the general election is likely to create considerable uncertainty over the likelihood of further tax rises and the medium-§term commitment to deficit reduction.

·       Structural factors, such as new regulation in the financial and energy sectors, the increase in the size of the state, high levels of debt, demographic trends, and the reversal of huge pre-crisis credit growth are likely to mean that we are unlikely to see significant “catch-up” growth in the medium-term relative to levels of GDP extrapolated from a pre-crisis trend line.

·       In our view, the best means of closing the deficit and creating the conditions for economic prosperity would be a significant reduction in government expenditure, reviewing not just the scale of state spending but also the scope of government, and allowing a significant reduction in taxation. Our publication, Sharper Axes, Lower Taxes outlined how this could be achieved.

·       Our more pragmatic, shorter-term suggestions for this Budget highlight policies which meet declared government aims: to reduce the budget deficit, to make the tax system more coherent, to reduce the burden of regulation, and to improve the framework of government for long-term fiscal responsibility.

·       Free bus travel, free TV licences and the winter fuel allowance should all be abolished. This would save around £4 billion per year.

·       Means-tested pensioner benefits should be increased by 1% per year for the next three years, in line with government policy for means-tested working age benefits.

·       Legislation should be introduced requiring thresholds for inheritance tax, stamp duty and all income tax thresholds to be increased annually by the higher of wage inflation and retail price inflation.

·       A wealth tax or mansion tax should be ruled out. Stamp duty should be reformed away from the current slab structure, and eventually abolished. Council tax for homes worth £1 million or more should be replaced with a tax on imputed rent. Net revenues from the tax on imputed rent should be used to reduce stamp duty.

·       An exemption to employment law should be introduced such that new firms and small businesses are able to treat a certain number of employees as self-employed. Mandatory sunrise clauses between the announcement of a new rule or regulation and a company’s liability to comply with it should be introduced.

·       The current all-encompassing Budgets and Autumn Statements should be abolished and replaced with a short statement outlining the changes to tax rates, allowances and borrowing required to meet public spending obligations. Other announcements should fall under the auspices of the relevant departments.

The publication featured in The Daily Mailand The Independent.

To read the press release, click here.

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Philip Booth 154x154

Academic and Research Director, IEA

Philip Booth is Academic and Research Director at the Institute of Economic Affairs and Professor of Finance, Public Policy and Ethics at St. Mary's University, Twickenham. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. Previously, Philip Booth worked for the Bank of England as an advisor 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 and on the editorial boards of various other academic journals. 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.

Ryan Bourne

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.

Mark Littlewood

Director General, IEA

Mark Littlewood is the Director General of the Institute of Economic Affairs and the IEA’s Ralph Harris Fellow. Under his leadership, the IEA has continued to communicate the benefits of free markets to an even wider audience around the world. In 2014, Mark was ranked 38th on The Times’ ‘Right-wing Power List’, and in 2011 was named ‘Liberal Voice of the Year’ by the Liberal Democrat Voice. Mark frequently comments on political and economic issues on television and radio including BBC Question Time, Any Questions, Newsnight, Channel 4 News, Sky News, Radio 4's Today Programme and LBC. Prior to the IEA, Mark was Head of Media for the Liberal Democrats before going on to found Progressive Vision, a classical liberal think tank. Mark was educated at Balliol College, Oxford.