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 proposal for 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later on as support is withdrawn and taxes increased - or that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.
