Budget 2021: Think Tanks Respond

Wonk world is in overdrive responding to the good, the bad, and the ugly of this afternoon’s budget. Guido brings you a low-down of what the Westminster wonks make of the announcements, ahead of the Chancellor’s first-of-its-kind press conference at 5pm today.

The Adam Smith Institute welcomed the headline-grabbing super deduction, but slammed “the silliness of the Mortgage Guarantee”. The ASI’s Matt Kilcoyne said:

“Rishi Sunak’s super deduction will induce investment into Britain’s factories and help businesses bounce back and Britain’s economy boom as we leave the pandemic behind. We’d estimated at 100% full expensing would be worth over £2,214 per worker, going beyond that is a bold move to help the private sector build the recovery. It will benefit most those areas that have been left behind in recent decades. It is the most serious attempt to rebalance the economy a Chancellor has made and it is truly welcome.”

The Institute for Fiscal Studies was doubtful the Chancellor truly levelled with the public on the level of the UK’s new debt. IFS Director Paul Johnson said:

“Mr Sunak made much of his desire to be honest and to level with the British people. The fact that he felt constrained to raise taxes by hitting companies and through freezing allowances, rather than through more explicit rises in people’s taxes, suggests there are limits to how far he wants to level with us as he attempts to raise the overall tax burden to its highest sustained level in history.”

The Centre for Policy Studies, welcomed Rishi Sunak’s plan for a business-led recovery, urging him to do more to increase growth in the long term. CPS Director Robert Colvile 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 But there is the danger of a cliff edge later on as support is withdrawn and taxes increased – or that businesses will anticipate higher taxes and fail to invest.”

The Resolution Foundation’s Director Torsten Bell said that this was a hard budget for Labour to respond to. Bell summarised the outlook as:

‘The recovery could be swifter later this year. In the meantime government has gone big again on pandemic support for firms and households. Further ahead they will massively tax firms, but to soften the blow hand them loads of cash if they invest now’

The Taxpayers’ Alliance said tax hikes risk choking the recovery. Chief Executive John O’Connell said:

“There were some wins for taxpayers today, but it doesn’t gloss over the fact that this was a tax-raising budget. The chancellor is helping to rescue struggling sectors but £30 billion worth of tax increases will hit hard-pressed households and businesses already under the highest tax burden in 70 years. Big tax hikes risk choking off the recovery Rishi wants before it has even started, so let’s hope that other measures in the budget help to boost jobs, spur investment and ultimately revive the economy.” 

The Institute of Economic Affairs slammed the “aggressive” move to hike corporation tax, saying the move will be “pass[ed] on to consumers in higher prices, to workers in the form of lower wages and fewer jobs”. IEA Director General Mark Littlewood said:

“After months of damage inflicted by the pandemic and lockdown measures, the Chancellor had the opportunity to deliver a pro-business, pro-growth Budget by lowering and simplifying taxes and slashing unnecessary regulations. Instead, we received a barrage of short-term costly measures which risk depressing economic growth, reducing employment, hampering entrepreneurialism, and ultimately harming the long-term economic recovery. Dialling up taxes was a mistake, and our economic growth will be less impressive as a result.”

The Centre for Social Justice broadly welcomes the budget. Policy Director Edward Davies said:

“We are pleased that the Chancellor is extending the £20 uplift in Universal Credit for another six months. Universal Credit is a lifeline for the poorest people in the UK and today’s decision will make a significant difference to many people. Likewise, the announced increase of the National Minimum wage to £8.91 an hour from April is also welcome and will be a huge help to those working low paid jobs.”

Onward‘s director was effusively supportive of the report. Will Tanner said:

“We’ve recommended much higher tax allowances in three papers to date. Levelling Up (2019) Levelling Up the Tax System (2021) Levelling Up Innovation (2021).”

A very mixed picture overall…

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