Responding to today’s Budget, Mark Littlewood, Director General at the Institute of Economic Affairs, said:
“This is a fiddly, tinkering, complicated budget which cannot be expected to do much to promote the economic growth the UK so badly needs. Spending remains too high and the government may well continue to run a deficit for the rest of the decade, thereby still adding to the national debt. The ring-fencing of areas of very high government spending has made it much harder for the Chancellor to come remotely close to balancing the books. Even his new, more modest plan to eventually stop over-spending is reliant on growth forecasts which, to date, have been wildly over-optimistic.
"The Chancellor has not stuck to the course. He has allowed his targets on deficit reduction to slip, providing no real room for serious reductions in tax. Even as he increases the basic income tax threshold to £10,000, he is dragging many middling earners into the higher rate band. If this strategy is what George Osborne considers to be austerity, one dreads to think what largesse might look like.”
Prof. Philip Booth, Editorial Director at the Institute of Economic Affairs, said:
“The Chancellor should be commended for reducing Corporation Tax to 20 per cent, which will remove important distortions in the tax system. This change, and the reduction in fuel and beer duty, however, were occasional bright spots in an otherwise uninspiring package.
"Regrettably, the government has decided to make the tax system yet more complex by the extension of tax relief for childcare and special tax incentives for private investment in social enterprises, the ceramics industry, high-end entertainment and low-emissions vehicles. The Chancellor’s obsession with picking winners is making our tax system ever-more incoherent and providing more opportunities for aggressive tax avoidance.
"The government’s approach to the growth agenda is shambolic. For example, the decision to provide further Treasury guarantees for mortgages is leading the government to get involved in exactly the sort of reckless behaviour that led to the failure of major banks in 2007-2008. Any attempts to provide support for the housing market whilst not liberalising the planning system will simply lead to higher house prices and rents.”
Notes to editors
To arrange an interview with an IEA spokesperson please contact Stephanie Lis, Communications Officer: 0207 799 8909 or 07766 221 268.
The IEA set out its recommendations ahead of the 2013 Budget. These can be seen here.
In July 2011, the IEA published Sharper Axes, Lower Taxes: Big Steps to a Smaller State. The research laid out plans to get government spending to below 30% of GDP.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
The IEA is a registered educational charity and independent of all political parties.