Chancellor raises white flag on economic growth - IEA

Commenting on the Budget, Callum Price, Director of Communications at the Institute of Economic Affairs said:

"The Chancellor has raised the white flag in the battle for economic growth. Instead of putting it front and centre of her plans, taking the necessary radical action to fix our tax system and strip back public spending to a sustainable level, she has instead prioritised keeping her backbenchers onside and doing her best to avoid painful headlines.  

"The result is a mess of painful tax rises on working people, exactly the same people she pledged to protect, and the very people and businesses who drive economic growth.  

"Where there should be a real vision and tangible plan to return economic dynamism to Britain, deliver the growth that could end our doom loop and improve the livelihoods of every Briton, we have been given yet another record high tax burden being used to support yet further swelling of the state."

Commenting on the Budget, Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, said:

"After months of damaging speculation, the Chancellor delivered yet another ‘tax and spend' Budget, which will do little to tackle any of the UK's deep-rooted economic problems.

"The overall package was not quite as punishing as some had feared, and the main tax increases will not kick in for several years. The Chancellor has also given herself more headroom than expected against the fiscal targets, which might make it less likely that she will have to come back for more any time soon.

"Spending will still be higher than previously planned, and taxes will rise even further. The Chancellor has broken the promise she made last year by extending the freeze on income tax thresholds for a full three years. This is the UK's least stealthy “stealth tax”, since everybody is talking about it.

"Other key measures will target salary-sacrifice pension contributions and higher-value properties. These measures could easily backfire, discouraging savings for retirement and further gumming up the housing market. Higher taxes on dividends and landlords will also undermine incentives to invest.

"Relying on a dog's breakfast of bitty tax increases is risky, because both the revenues and the wider economic impacts are relatively uncertain.

"There were some gestures to 'cut the cost of living, but these measures just shifted the burden from bills to taxes, leaving households no better off. They will also lower headline inflation by just 0.4 percentage points next year, and inflation will still be higher for longer as a result of decisions made last year."

Commenting on the Budget, Len Shackleton, Editorial and Research Fellow at the free market think tank the Institute of Economic Affairs, said:

On the increase in the minimum wage, Len said:

"The Chancellor has announced that minimum wages are to rise significantly, and that the differential between younger and older minimum wage rates will be further reduced. This is part of a longer-term move towards equalising pay for all minimum wage workers. A key figure is the increase of 8.5% in the hourly rate for 18-20 year olds. This increase is in effect a further 'tax' on employing young workers, following on from the minimum wage increase last year and the employer national insurance contribution hike. With unemployment amongst this age group already rising, this tax on jobs is likely to make it harder for young people to enter the labour market and push more onto benefits for years to come."

On the decision to abolish the 2-child benefit cap, Len said:

"Dropping the 2-child limit on means-tested benefits will add substantially to the cost of these benefits, probably something of the order of £3 billion a year. At the same time, it will reduce the incentive for parents to seek work or to work longer hours if they are in work."

On the decision to freeze prescriptions and rail fares, Len said:

"The decision to freeze prescription charges and regulated rail fares is poorly targeted, will barely be noticed by the beneficiaries, and probably means a permanent increase in government subsidy. This is a particular concern in relation to the railways, where nationalisation of the passenger services is now in full swing. Trains are already massively subsidised, and there are few signs of cutting the revenue deficit or increasing productivity. Changes in working practices are strongly resisted by powerful unions, which have won excessive pay increases from this government."

On the Chancellor's budget, Dr Chris Snowdon, Head of Lifestyle Economics at the free market think tank the Institute of Economic Affairs, said:

"Rachel Reeves promised not to raise taxes on working people. What about working people who like a drink, have a flutter, have a vape and - dare I say it - have a smoke? Don't those millions of working people count?"

On the tobacco duty rise, Chris said:

"The black market for tobacco is out of control thanks to endless tax rises. Four in ten cigarettes smoked in Britain are now bought illegally, and the government is losing billions of pounds of tobacco duty revenue as a result. We are now past the tipping point. Every tobacco tax rise leads to less tobacco duty revenue and more crime. The government needs to pull its head out of the sand and deal with what is happening on every high street."

On the gambling tax, Chris said:

"Anti-gambling fanatics have fooled Rachel Reeves into believing that the online gambling and betting industries are a bottomless pot of gold for her to plunder. The limits of that delusion will now be vividly exposed as punters switch to offshore websites and the government loses money. This is one of the few sectors in which Britain can claim to be a genuine world leader, and it is about to be kneecapped by its own government."

On the alcohol duty rise, Chris said:

"After some huge hikes in duty under the teetotaller Rishi Sunak, this is another kick in the teeth for pubs and those who drink in them. Those tax rises didn't lead to a rise in revenue, and I suspect these tax rises will fail in the same way. Reeves is chasing her tail, trying to rinse drinkers of their last few pounds."

On the Chancellor's budget, Andy Mayer, Energy Analyst at the free market think tank the Institute of Economic Affairs, said:

"While temporarily lower energy prices are welcome, they are no substitute for sustained lower costs. 

"The Government should not delay 3 months to comment on the Fingleton report, a plan to reduce the policy cost of new nuclear power. They should commit to implementing it, in full, now.

"They should not play a shell game with renewables costs, temporarily hiding 75% of old wind farm bungs on tax bills, but reduce the subsidies, permanently. 

"It is incoherent to do this while putting the cost of building Sizewell C on bills, making renewables look relatively cheaper, when the opposite is true.

"Road or mileage pricing is likely inevitable, as fuel duty receipts fall. But it is again incoherent to increase subsidies for purchasing electric vehicles, then tax them. Cutting the subsidies to zero would save money now. 

"The £4.4bn the EV excise duty is further expected to raise is more than offset by the £5-6bn fall in expected oil and gas revenues from the North Sea. It seems unlikely, then, that it can boost the roads fund as the Chancellor claimed. 

"Similarly, while no change in fuel duty is welcome, the fiction that this is a freeze of an inevitable escalator that restarts in April 2027 should end. Cutting rates, conversely, would reduce the household bills for working people immediately."