Policy Wonks Respond to Rishi’s Summer Statement

Guido brings you a summarised round up of the response from policy wonks to the Chancellor’s statement today. All free market think tanks are happy with Rishi’s decision to cut “Britain’s worst tax” – stamp duty, although many want the change to be made permanent. On VAT cuts and food vouchers there’s more of a mixed picture, however, with questions raised about the utility of the measures. Whilst more red tape cutting would be better, there’s a general mood of qualified support…

The Adam Smith Institute backs the stamp duty cut and apprenticeship scheme, but criticises the VAT cut.

“Stamp duty is Britain’s worst tax. The cut is the right move to get Britain moving. Temporary measures to get young people work experience, to build inwork skills, are also welcome in the face of an increasing minimum wage.

“The stimulus proposals are very questionable. The VAT cut and subsidising restaurants will be expensive and provide limited benefit. People aren’t spending on food, accommodation and attractions because of safety concerns, not lack of demand or cash.”

The Taxpayers’ Alliance is delighted by the stamp duty cut, more cautious about the Kickstart scheme and says Eat Out to Help Out leaves a “bad taste in their mouths.” John O’Connell tells Guido…

“It is cheering that the chancellor appreciates the economic benefits of cutting taxes and in particular lifting the stamp duty threshold will provide a boon to the housing market. That said, while easing the burden on taxpayers is always welcome, we must look at longer-term tax simplification and put a stop to temporary fiddles.”

“The kickstart scheme could turn into a massive own goal for the jobs market. Subsidies for temp work won’t offer young people the proper opportunities they need to clamber onto the career ladder, but may only postpone painful youth unemployment. Long term measures to boost jobs and investment, such as cutting the employers’ NI jobs tax, would be a much more sustainable answer.”

“The truth is that a taxpayer-funded tenner off the bill is not enough to get the hospitality sector moving again. Many other measures – such as VAT and business rates holidays – have already been deployed. The focus instead should be on updating covid guidance, ditching bad regulations and ensuring supply chains can get back to normal by making investment easier, rather than ministers meddling in our meals.”

The Centre for Policy Studies is also specifically pleased with the stamp duty cut, but warns long term structural change is needed.

“We are delighted to see the cut in Stamp duty announced today – as one of the most hated and economically damaging taxes, this is something the CPS called for in our report ‘Stamping Down‘. The case the Chancellor was making is exactly what we said in our recent paper ‘Help to Build‘, but we would like to see this cut become permanent – which we have estimated will be much cheaper than the Treasury believes.”

“We welcome the focus on jobs and training, which is what the CPS recently called for in our report ‘After the Virus‘, but the challenge will be how to support the economy as we transition to new ways of working in a post-virus economy.

“You can see the Government is trying to strike that balance with this package, but these measures are temporary, and will have to be paid for down the line. This is why we would like to see the sort of long-term structural change that will maximise growth, support businesses and encourage them to create new jobs without placing the burden on the taxpayer.”

The Institute of Economic Affairs’ Syed Kamall wants the stamp duty cut to be permanent, and more to be done to encourage infrastructure investment. Fellow Professor Len Shakleton also warns of the dangers of recruitment subsidies.

“The cut to Stamp Duty is welcome but why isn’t it permanent? It is a destructive, regressive tax that clogs up the housing market and limits labour mobility. Making it permanent would get the property market moving and encourage those who want to downsize as well as those looking for family houses, freeing up homes for first-time buyers.

“It is disappointing more was not announced to encourage private investment in infrastructure – such as reopening old railways or rezoning to allow homes to be built in places being vacated by shops, such as high streets.” 

“The Chancellor has likely found a politically popular policy by offering subsidies for those employing under 25s but we should not expect too much real benefit.

“Recruitment subsidies have many drawbacks. Workers are taken on who would have found work anyway, with the taxpayer subsidy simply boosting the employers’ profits. The target group, in this case the young unemployed, are taken on at the expense of another group—say, older workers, women returners, or the only slightly less young, who become unemployed instead. The schemes also benefit large companies able to take on more subsidised workers over small and medium sized enterprises who do not benefit as much and therefore lose out in a competitive environment and have to shed labour or close their business.

“The real challenge is to deregulate the labour and product markets on a sustainable basis to encourage job creation over the longer term, rather than short-term sticking-plaster schemes of this kind.” 

A mixed picture for free marketeers in the unprecedented circumstances of Coronavirus. Distinct air of uneasy caution…

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