GREAT PRO-BUSINESS RHETORIC, BUT LITTLE SUBSTANCE
George Osborne proudly announced this Budget would be ‘unashamedly on the side of business and aspiration’. He set himself two aims: maintain fiscal credibility and foster the conditions for economic growth.
The former required sticking to very modest fiscal restraint. To achieve the latter, the Chancellor’s Budget needed to enhance the case for enterprise and wealth creation; to take bold attempts to reform the supply-side of the economy; and offer a vision for the future – with much lower government spending enabling targeted tax cuts for business. On this, it did not go anywhere near far enough.
However, most of the other measures announced amounted to small scale tinkering, regional hand-outs and re-arranging of deck chairs. So whilst this Budget had moves in the right direction, it needed to be much bolder in its pro-business agenda. It needed to cut taxes on businesses more vigorously by cutting wasteful government expenditure and setting out a vision for a smaller state.
Ryan Bourne, Head of Economic Research said, “The forecasts set out by the OBR today show that our public finances are still in a dire state, as expected. The Chancellor today needed to maintain credibility to curb this increase in debt whilst fostering the conditions for growth. There were some very modest, but welcome tax changes. But the Chancellor really needed to grant more assistance to small businesses. They are unlikely to believe the overall Budget was ‘unashamedly on the side of business’ when fuel duty is increasing, employers National insurance rates are so high, and business rates are going up. They will now cling to the hope that other deregulatory announcements, like planning reform, will meet the positive pro-growth rhetoric they have been given.”
Tim Knox, Director said: “Despite the bold rhetoric, the tax reforms are timid. They are moves in the right direction but little else. And the tinkering is irksome. The government will be borrowing almost £350 billion over the next three years – the equivalent of £13,000 per household – but we still had a list of ever-so-fashionable give-aways: £100 million for new research facilities at universities, £60 million to establish a UK centre for aerodynamics, an additional £50 million for broadband, tax breaks for video games, animation and high end TV industries, £3 billion for oil and gas exploration, £1.2 billion of infrastructure investment in Manchester, £150 million for other northern cities, an increase in the Growing Places fund of £270 million and so on and so on and so on.
There is also the question of the Post Office Pension Fund. The Chancellor is going to take the £28 billion of assets and use them to reduce the national debt. But the government is also taking on the £38 billion of liabilities, liabilities which will not show up in the debt statistics. What was a badly funded scheme will now, very worryingly, be a completely unfunded scheme.”