Wonks Welcome Kwasi’s Tax-Cutting Bonfire Budget

Today’s quasi-budget was a dream come true for most of Westminster’s free market think tanks. Some can barely contain themselves at the “new era” announced in the Commons this morning. Inevitably there are others who are shocked to see a Conservative government doing conservative things. As always, Guido brings you the low down on the reactions:

Unsurprisingly, the TaxPayers’ Alliance calls the plan “the most taxpayer-friendly budget in recent memory” – albeit with a warning on excessive spending.TPA chief executive John O’Connell writes:

Taxpayers will be delighted with a budget that eases the burden on their bottom lines and promises a growth game-changer. With cuts to income tax and stamp duty, the cancellation of the corporation tax and national insurance rises, and the freeze to alcohol duties, households and businesses will welcome the most taxpayer-friendly budget in recent memory. But to end the cost of government crisis, the Treasury now needs to get serious on spending and ensure borrowing doesn’t weigh down generations to come.”

The Adam Smith Institute is similarly impressed, saying the budget is “the first step to getting the British economy back on track.” ASI Head of Research Daniel Pryor adds:

“The planned corporation tax rise would have hammered businesses, choked off investment and reduced workers’ wages—scrapping it was a sensible move. It’s also encouraging to see that the Chancellor understands the importance of generous capital allowances, as well as headline rates. Making the £1 million Annual Investment Allowance permanent means businesses across the country have greater capacity and certainty to boost the economy at a time we need it most.”

The Institute of Economic Affairs also lavished Kwasi with praise, particularly over the income tax cuts. IEA Director General Mark Littlewood says: 

This isn’t a trickle-down budget, it’s a boost-up budget. The government has announced a radical set of policies to increase Britain’s prosperity – from cancelling the corporation tax rise, to cutting stamp duty and extending investment allowances. It’s refreshing to hear a Chancellor talk passionately about the importance of economic growth and supply-side reforms, rather than rattling off a string of state spending pledges and higher taxes. Only by bearing down on the amount of tax the state collects across the income spectrum, and reducing the regulatory burden, can we create better conditions for growth.”

The Centre for Policy Studies might as well get the champagne out. CPS Director Robert Colvile took to Twitter to share his excitement:

“Not to blow trumpet, but: Cancelling CT rise ✅ Unapologetically pro-business agenda ✅ Stamp duty ✅ Opportunity Zones ✅ Reversing NI rise ✅ Childcare reform ✅ Action on energy ✅ All they need is capital allowances and it’ll be a [CPS] full house…”

Of course, not everyone is happy: the Resolution Foundation is predictably queasy. Chief Executive Torsten Bell is calling the announcements “full throated trickle down” economics:

“[The] Chancellor has announced biggest tax cuts since the 1970s, at price of public finances being set on an unsustainable footing. Gambles on growth, which is in Putin’s hands rather than ours in the short term… It’s hard not to be awed by the scale of what has been announced today: huge tax cuts… totally rejecting not just Treasury orthodoxy but Boris Johnson too… not just full throated trickle down, not just throwing fiscal sustainability out window, but also leaving little wriggle room on public spending to make problems go away pre-election.”

Likewise, the Institute of Fiscal Studies‘ Director Paul Johnson admits he’s “worried” by the gilt markets, although he does at least welcome the cuts to stamp duty. He writes:

“£45 billion of tax cuts. This is biggest tax cutting event since 1972. Barber’s “dash for growth” then ended in disaster. That Budget is now known as the worst of modern times. Genuinely, I hope this one works very much better… Increase in stamp duty threshold is welcome. But this is a relatively modest change compared with some of other things we’ve heard. Needs more reform than that.”

The Tory wets at Bright Blue claim

“This strategy is not particularly conservative; last decade, the Tories were all about fiscal discipline. But, with no qualms about tax cuts that will disproportionately benefit high earners and large companies, this Government is not especially socially democratic either. Most of the tax cuts could have been better targeted, as they were – admittedly – for today’s Stamp Duty cuts. There is real risk in all this radicalism… After twelve years of running the country, the Tories desperately need to establish a record of delivery quickly if they want to cling on to power. Knowing this, the Prime Minister and Chancellor are going for broke.”

The National Institute of Economic and Social Research (NIESR):

“We now forecast that the energy support guarantee, together with the tax cuts announced today, will lead to positive GDP growth in the fourth quarter of this year, shortening the recession and raising annual GDP growth to around 2 per cent over 2023-24.”

Policy Exchange were happy to finally see a focus on growth. Head of Economics and Social Policy Connor MacDonald said:

“This is a sea-change in Government policy, and a welcome one. The UK’s trend-rate of growth is too low, and it has had significant negative impacts on public services and on living standards in the last decade. This is an unambiguously pro-growth budget, and the tax cuts outlined will spur growth, encourage investment and ensure that the UK can respond to weak global economic conditions. What will be key going forward is to match the fiscal ambition with supply-side reforms that can raise the trend rate and ensure that the fiscal expansion is ultimately sustainable.”

Momentum‘s take is easy to summarise

“The Tories have declared class war.”

If Kwasi’s upset by the scepticism, there is at least one person he can turn to for comfort:

It’s a budget that upends years of Treasury orthodoxy and Whitehall groupthink. Guido’s inclined to agree.

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mdi-account-multiple-outline Kwasi Kwarteng
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