Responding to the Chancellor's Budget statement, the Centre for Policy Studies, the leading centre-right think tank, welcomes Rishi Sunak’s plan for a business-led recovery, but urges him to do more to increase growth in the long term.
Robert Colvile, CPS Director, said:
'The combination of business rate reductions, investment incentives and other measures should help business and the economy rebound powerfully in the next few years - and we are pleased to see our proposals for full expensing and free ports at the heart of the Chancellor’s speech. But there is the danger of a cliff edge later on as support is withdrawn and taxes increased - or that businesses will anticipate higher taxes and fail to invest.
‘Britain still has a huge problem with its long-term growth rates - as the latest OBR figures show only too clearly - and the tax burden is set to increase inexorably. We appreciate that the Chancellor needs to balance the books. But the great challenge facing the Government is not just to put the economy back on an even keel in the short term, but put in place permanent pro-growth measures that raise growth rates for good.’
The think tank welcomes the adoption of multiple CPS proposals, including the extension of furlough and other support; the continuation of the business rates holiday; the extension of the stamp duty holiday; the adoption of far more generous investment allowances (aka ‘fuller expensing’); new visa arrangements and other measures to support high-growth scale-up companies; and the focus on the free ports first proposed by the Chancellor in a CPS report.
It also welcomes the fact that the Chancellor has, as it urged, delayed increases in taxation until the recovery is more secure, and that proposals to increase capital gains tax and other levies have seemingly been abandoned.
However, it is critical of the decision to increase taxes on business as damaging to growth and investment, and the decision to increase the minimum wage at a time of surging youth unemployment. It also warns that the Government’s new mortgage guarantee will need to be carefully designed, in order to avoid the problems with its predecessor, the Help to Buy Mortgage Guarantee.
It also points out that many of the Government’s welcome incentives, such as the ‘super-deduction’ for business investment, are set to expire just as taxes start to rise - and that growth in the final three years of the parliament is still set to be mediocre after the post-pandemic recovery subsides, reflecting the need for a bolder and more permanent pro-growth strategy.