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…

mdi-timer 8 July 2020 @ 15:04 8 Jul 2020 @ 15:04 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
CPS Release Javid’s Blueprint for Recovery

Former Chancellor Sajid Javid has teamed up with the wonks at the Centre for Policy Studies for a new report released today setting out proposals with two aims – to bounce back from the economic devastation wrought by the Coronavirus, and additionally to not just reconstitute the post-pandemic economy in the same way it existed before, rather to build a better one. In total there are 63 recommendations to implement… 

One major shift endorsed by the former Chancellor in the paper is a shift in focus for the Bank of England, from being tasked with targeting inflation, to targeting nominal GDP instead – shifting the bank’s focus to total spending in the economy, creating the best possible conditions for sustained growth. This is a currently fashionable idea which has it merits. Guido suspects it will be tricky to do… the Bank of England has not had many quarters where it has hit the inflation target,

Another proposal is for establishing a British Infrastructure Bank based outside the South East – an idea that was popular with John McDonnell. Guido can explain why private sector investment is not more evenly spread across the nation – investors are not convinced of the returns. Why not drop capital gains taxes for private investors in areas where infrastructure is wanted? Let the private sector take the risks and increase the rewards by relieving them of capital gains taxes. That reduces the probability of politically directed malinvestments.

Cutting employer’s National Insurance to get firms hiring again, reforms to planning rules (including fast-tracking reclassification of Green Belt), and a new generation of development corporations. Variations on policy proposals that always seem to be proposed and somehow never happen. Let’s see if an 80 seat majority overcomes the obstacles…

mdi-timer 23 June 2020 @ 14:55 23 Jun 2020 @ 14:55 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Foreign Office to Absorb Department for International Development

The long mooted plan for the Department for International Development to be folded into the Foreign Office is to finally come about today. The idea has been advocated by centre-right think tanks for years, notably by the Henry Jackson Society which published a paper (with an introduction by one B. Johnson) detailing the proposal last year and the Taxpayers’ Alliance with a Select Committee submission in May. The UN’s 0.7% of GDP target for aid spending is set to remain, although the FT’s Seb Payne is reporting that this year for the first time despite still meeting the target, spending on aid is set to fall too.

This will be a popular move with the country, which has consistently believed too much is spent on overseas aid…

mdi-timer 16 June 2020 @ 11:50 16 Jun 2020 @ 11:50 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Wonks Propose Lockdown Exit Strategies

Despite Sir Keir Starmer calling on the Government to develop an exit strategy from lockdown, left-wing think tanks have not produced any sizeable research on the matter. Those on the centre-right, however have been busily researching and publishing safe routes out. Guido has collated a handy summary:

The Adam Smith Institute argues that the impact of the lockdown on the economy grows deeper and faster over time. It recommends a phased plan should be developed and released by the Government including:

  • Decentralised mass testing, and isolation and tracing of cases while protecting privacy.
  • encouraging physical distancing, maintaining limits on mass gatherings and special measures for at-risk groups in early stages;
  • allowing as many businesses as possible, as quickly as possible, to reopen their operations;
  • introduce policies, both permanent and temporary, that will enable the economy to bounce back after the crisis, including cutting excessive red tape and taxes that discourage investment.

The ASI have also called for the establishment of an Economic Advisory Group for Emergencies (EAGE) to advise on the withdrawal of the lockdown, operating in tandem with SAGE.

The Tony Blair Institute appears to have bought into the idea of app-augmented contact tracing, citing research that estimates 60% app usage could end the epidemic. Its new paper argues:

  • The UK could shift to ‘soft lockdown’ with open schools, open businesses with strict social distancing and capacity limits, mass face mask wearing, although over 65s staying in ‘hard lockdown’ if:
    • Daily new cases < 500
    • Testing capacity > 100k
    • Tracing capacity > 50%
    • Vulnerable remain shielded
  • The UK could move to ‘soft open’, with open hospitality sector without capacity limits, shops with social distancing, and transport with face masks if:
    • Daily new cases < 100
    • Testing + tracing as above

Policy Exchange argues that the Government should introducing digital contact tracing as a Sixth Pillar to its Five Pillar Testing Strategy, creating a ‘Six Pillar Testing and Tracing Strategy’. It argues:

  • A ‘suppression’ strategy will need to include three pillars that are all inter-related: i) intermittent social distancing, ii) swab testing, iii) contact tracing
  • A cross-Government, multi-agency, 24-7 national Testing and Tracing Command Centre should be established, modelled on those in Taiwan and Singapore and those within Counter Terrorism.
  • Urgently launch a national voluntary App to significantly improve ‘contact tracing’ of those infected with coronavirus.
  • Less technologically literate people should be taught by Government how to use the app.

The Centre for Policy Studies has calculated today that Government borrowing this year will rise from £55 billion to approximately £300 billion, representing a staggering 15% of GDP. This is money that will have to be paid back through new taxes, spending cuts, and the return of inflation. Showing the need for an exit strategy before this figure balloons much further…

mdi-timer 21 April 2020 @ 12:47 21 Apr 2020 @ 12:47 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
SpAd Moves & Wonk Watch: Policy Exchange Reshuffle Edition

Policy Exchange seem to be getting on the front foot when it comes to think tanks’ influence over the Government, becoming further entwined with the Boris administration since No. 10 hired from their fold in February. Guido now learns PX has taken on Nusrat Ghani MP as a Senior Fellow researching Maritime Business and focusing on launching a new era for British shipping; leaping on Boris’s February Greenwich trade speech that promised “an explosion of global trade propelled by new maritime technology”. Ghani takes the role having been freed from ministerial duties in the reshuffle…

PX also takes on Chris Brannigan as a ‘national resilience’ fellow, having served as a SpAd to the PM working on defence and space policy.

In return Policy Exchange are donating Dr. David Shiels, who only recently joined PX when Open Europe was absorbed by them, and who is leaving to become a Northern Ireland SpAd to Brandon Lewis.

Since last week, Guido hears;

  • Leonara Campbell is on the No. 10 briefing team
  • Alex Hitchcock has moved to BEIS, after previously having worked with Alok Sharma at Work and Pensions
  • Ben Jafari has become the third MoJ SpAd, with Rajiv Shah going joint with No. 10’s policy unit on a non-specific legal oversight brief

Keep up to date with Guido’s rolling SpAd list here

mdi-timer 14 April 2020 @ 16:15 14 Apr 2020 @ 16:15 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Wonks Propose Age-Based Lockdown Exit Strategy

Academics from the Centre for Competitive Advantage in the Global Economy at Warwick University have released a paper suggesting one way to begin ending the lockdown – by releasing the 4.2 million people age 20-30 who do not live with their parents…

The paper, which laments the fact that “no clear exit strategy currently exists“, notes that the cohort overwhelmingly works in the private rather than the public sector and as a cohort is likely to be hit harder by the shutdown by other age groups. Similarly the group has the advantage of generally being less affected by the virus. The idea is pitched as the best way to save the economy without damaging people’s health. Are we about to see a ramping up of the sale of fake IDs… for people in their 30s?

mdi-timer 9 April 2020 @ 08:58 9 Apr 2020 @ 08:58 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
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