We have published our post-Budget briefing this morning, complete with graphical illustrations to complement its analysis of the Chancellor’s announcements.

The key findings are as follows:

TAXES

• The new allowance for Employers’ National Insurance, the cut in Corporation Tax, the freeze in Fuel Duty and cut in Beer Duty are all to be welcomed
• Many of the tax changes are sadly adding to the complexity and instability of the tax system, which the Government has thus far failed to reform and simplify
• In January 2013, the TaxPayers’ Alliance revealed that the Coalition Government had implemented or planned 299 separate tax rises and 119 separate tax cuts since it came to power; after yesterday’s Budget, our preliminary estimate is that at least 413 separate tax rises have already been implemented or are planned before May 2015 compared to just 166 separate tax cuts.

SPENDING

• Government departments have been significantly underspending against their original budget allocations but, crucially, the Chancellor failed to address the continuing overspend against the government’s revenue base
• Relative to our economy and its capacity to bear taxation, government overspending is worse than it appeared when the Coalition came to power
• Despite the substantial shortfall in economic growth and revenue below what had been expected, the Coalition Government has not cut spending below its original trajectory
• Given recent growth performance, the continuing problems in Europe, our broken banks, and high energy prices, the convergence of spending and revenue which the Government predicts may not happen at all
• Without new controls on pay increases, there is a serious risk that public sector pay will not be contained to a 1% rise since the total public sector pay bill has continued to rise over the last three years, despite a supposed pay freeze and a fall in public sector headcount

DEBT

• By 2017-18, even on the OBR’s optimistic forecasts, the Coalition Government will have more than doubled the official national debt it inherited
• According to the Office for National Statistics, the government’s overall liabilities amount to well over £7 trillion, equivalent to five times GDP
• All of the government’s liabilities require servicing, and if we add in pension payments and PFI, total debt servicing is already around £170 billion a year, and is set to increase to £220 billion a year by 2017-18. By then, over 30 per cent of government revenues will be earmarked to service past liabilities rather than to pay for current services

CONTINGENT LIABILITIES

• There are enormous economic risks with the Government’s new £12 billion policy of guaranteeing mortgage loans on a substantial scale through “Help to Buy”, in a manner reminiscent of the arrangements in the United States which are thought to have contributed to the build-up of subprime debt that triggered the financial crisis
• Between “Help to Buy” and the National Loan Guarantee scheme announced in last year’s Budget, nearly 14 per cent is being added to total guarantees
• The Government should be far more open and transparent about the contingent liabilities it is taking on so that such commitments – which take a significant risk with taxpayers’ money – are subject to proper scrutiny

The Chancellor of the Exchequer, George Osborne, announced a number of welcome measures to relieve the tax burden on struggling families in today’s Budget, including:

• Cut in beer duty, and the abolition of the beer duty escalator. A major victory for the MashBeerTax campaign organised by the TaxPayers’ Alliance (TPA), working with other campaigners for lower beer duty.
• Another freeze in fuel duty, following the freeze last year after the TPA FreezeFuelTax campaign.
• An increase in the Personal Allowance.
• A cut in Employers’ National Insurance.
• A cut in Corporation Tax to 20 per cent, which will be passed on to workers in higher wages.

However, the TPA has warned that the Chancellor is still relying too much on complicated measures to help specific industries, rather than making fairer and simpler changes to the overall tax structure.

Reacting to today’s Budget, Matthew Sinclair, Chief Executive of the TaxPayers’ Alliance, said:

“George Osborne has announced welcome relief for people struggling with the high cost of living. The cut in beer tax, the freeze in fuel duty and the higher personal allowance will all ease the pressure on family budgets. Lower Employers’ National Insurance and Corporation Tax will also be passed on to workers in higher wages.”Unfortunately, the great limitation of this budget was that it relied far too much on complicated targeted reliefs instead of tax cuts across the board. Simpler, strategic tax reforms that reduce the overall burden would be fairer and do more to produce the stronger economy Britain needs.”

This afternoon Parliament will likely make emergency changes to welfare legislation following the fallout from the Cait Reilly Poundland case .  Critics of the policy being pursued by the Government, such as Shiv Malik in this particularly misleading Guardian article, argue that the DWP is somehow seeking to strike down the Court of Appeal judgement deny claimants compensation that they deserve for being made to “work for the benefits”. Don’t believe this nonsense. They are adjusting legislation that was illegal because of the way it was introduced, not what it did.

Campaigners in the Poundland case sought to portray the Work Programme as modern day slavery (something that is frankly insulting to those who have experienced genuine slavery in the modern era) and a breach of claimants’ “human rights”. The Court of Appeal utterly rejected this argument. Whilst ruling that the legislation used in Parliament to introduce the scheme was flawed, it certainly did not reject the principle of expecting those out of work to take part in mandatory work experience in return for some of their benefits. Continue Reading

Cornwall Council was caught hopping by the surprise freeze in Council Tax forced on them by opposition councillors, says Cornish MP George Eustice. The Conservative run council had planned to raise its Council Tax by 1.97% just below the threshold needed to trigger a local referendum. But the opposition Lib Dems were joined by some backbench Tories to pass the freeze in the budget by 52 votes to 49.

Cornwall’s cabinet had argued that a rise in Council Tax was needed to protect frontline services but the opposition said their budget could freeze the tax and make savings of £4.6m by giving local residents exactly what they wanted rather than wasting money on unwanted council expenditure. ‘What I hope will happen,’ says MP Eustice, ‘is that, after council elections in May, the new regime will be able to have an emergency budget and have a proper look at how to deliver these savings but do it in the most sensitive way.’ Continue Reading

A new book by the Adam Smith Institute’s Research Fellow JP Floru assembles a small mountain of anecdotes, statistics and historical analysis to make a powerful case. Tougher regulation, high government spending and the high taxes that are required to pay for it all destroy growth and leave end up making everyone worse off. Heavens on Earth: How to Create Mass Prosperity looks at eight countries in terms of low taxes, free trade, light regulation and how changes in policy have led to dramatic changes in prosperity.

Two countries stand out from the crowd, Hong Kong and Singapore. While Britain has had a government which has consumed and taxed between 35 and 50 per cent of national income, in those two countries the proportion has been between 10 and 25 per cent. With a much smaller government holding back the economy , the results have been remarkable: Continue Reading