Commenting on the budget, Tom
Clougherty, Executive Director at the free market think tank the
Institute of Economic Affairs,
said:
“The Government came into office promising to prioritise growth.
But the reality of their first Budget – heavier burdens on
business and more borrowing for public sector capital spending
– does not inspire much confidence in their approach.
“Coming alongside an inflation-busting increase in the minimum
wage and heavy-handed changes to employment law, higher employer
National Insurance Contributions will be a bitter pill for firms
to swallow. Businesses will see their costs rise and it will be
workers who pay the price – in the form of lower wages,
reduced benefits, and fewer job opportunities. The idea that this
Budget does not increase taxes on workers is an economic
fantasy.
“While rejecting an extension to the freeze on income tax and
national insurance thresholds is welcome, it does not undo the
damage elsewhere. They will still remain frozen for now, meaning
the effects of fiscal drag will continue to eat into our pay
cheques for the next 4 years.
“Meanwhile, the government is putting an awful lot of faith in
its ability to choose and deliver public sector capital projects
that deliver meaningful economic benefits. Few outside Whitehall
will share their optimism. Greater emphasis on assessing the
costs and benefits of capital spending is welcome, but a better
approach altogether would have been to focus on eliminating
barriers to investment by the private sector.
“Elsewhere, the worry is that Britain's international
competitiveness and economic dynamism are facing death by a
thousand cuts. Individually, the measures taken on Capital Gains
Tax, non-doms, and stamp duty might not make headlines. But
taken together, they paint a sorry picture of the way things are
going.
“Without a radical, reformist agenda – a focus on the
fundamental causes of our economic malaise – this government
faces the same fate as its immediate predecessors: getting stuck
managing Britain's relative decline, with no clear plan to break
free of it.”
Commenting on the announcement that the minimum wage will
rise by 6.7% in April, Professor Len Shackleton, Editorial and
Research Fellow at the free market think tank the Institute of
Economic Affairs, said:
“Labour has, as expected, substantially upped the minimum wage
rates. This will affect the pay, directly or indirectly, of well
over three million workers. This will add to the other costs
imposed on employers either explicitly in the budget or
implicitly as a result of new work rights. While it may not lead
immediately to job losses, the extra pressure on smaller
employers in particular is likely to send some to the wall in the
medium term.
“The quite extraordinary increase in pay - 16% - for 18-20 year
olds is part of the transition towards paying all adult workers
the same minimum wage. It will make younger workers less
attractive to employers and may well spark a rise in the youth
unemployment rate as employers prefer older and more experienced
recruits. It will certainly make considerably more difficult the
task of bringing the large number of inactive young people into
employment.
“In the longer term, basing pay not on the productivity which
workers bring to the employer but on what bureaucrats consider to
be their needs will lead employers to automate many jobs, to
contract work out to the self-employed, or to switch production
to other countries.”
Commenting on the tax changes to e-cigarettes, tobacco
and beer, Dr Christopher Snowdon, Head of Lifestyle Economics at
the free market think tank the Institute of Economic Affairs,
said:
"A wealth of economic evidence shows that taxing e-cigarettes
leads to more people smoking. Taxing vape juice shows that the
government is not serious about its 'smokefree'
ambitions.
“Reeves says that yet another 'one-off' tax hike on tobacco will
dissuade vapers from switching back to smoking, but with 26% of
the cigarette market already in the hands of organised crime, the
legal price of cigarettes is irrelevant to a growing number of
smokers. Tobacco duty revenue has fallen by £1.5 billion in the
last two years and it will go on falling, despite the tax rate
rising, because smokers feel no moral duty to buy legal
cigarettes and give money to politicians who so obviously hold
them in contempt.
“Cutting draft beer relief so that a pint in a pub is 1p cheaper
doesn't come close to compensating from this tax raid. Drink 600
pints and get one pint free? It is a cheap gimmick."
