On 21 March George Osborne delivered
his third budget.
The responses to the budget have been mixed, with business leaders praising the
introduction of a ‘patent box’ and the cuts to corporate tax, the banks
condemning the increase in the bank levy and the opposition calling it the ‘millionaire’s
budget’. The ResPublica team have collated a
round-up of the key reactions to the Chancellor statement.
In his response to the
budget in the House of Commons Ed Miliband, Leader of the Opposition, suggested that the measures announced in the
Budget were a blatant contradiction to the ‘we are all in this together’
rhetoric embraced by the Coalition Government:
“Tax credits cut, Child Benefit taken away, and fuel duty up. And what
has he chosen to make a priority today? For Britain’s millionaires, a massive
income tax cut…The fairness test for this Budget was whether the Chancellor
used every penny he could to help middle income families that are squeezed. He
has failed that test… Wrong choices. Wrong priorities. Wrong values.
Out of touch. Same old Tories.” This sentiment was echoed
by Ed Balls, the Shadow Chancellor, who questioned whether the cut in the top rate of
income tax from 50p to 45p is likely to increase the amount of tax taken and
enhance enterprise, as the Chancellor put forward. He suggested that by
reducing the top rate, the Government “are
gambling that if you give £10,000 to the richest people who currently pay tax,
they will somehow be able to recoup £2.9 billion from people who currently
aren’t paying tax…because of avoiding tax. The problem is there is no certainty
they will get that money. Is it
really right when families are under pressure with their fuel bills, losing
their tax credits, losing their child benefits to gamble…that making the rich
richer will somehow pull in all this extra revenue? There is no evidence for
this at all”.
Assessing the budget from the fiscal
point of view, Paul
Johnson, Director of the Institute for Fiscal Studies, summed up his reaction to
the budget at an IFS event by suggesting that “[p]erhaps one worry for the Chancellor…is
that in his attempt to achieve a fiscally neutral package he has created some
risks…We do not know…that the cut in the 50p rate will cost only £100 million.
We do not know that the proposed caps on tax reliefs will bring in the £300
million or so the Chancellor is banking on. Nor do we know that the stamp duty
changes will raise the nearly £300 million that he has pencilled in.”
In contrast to these
sceptical responses, the business sector welcomed the budget with a lot of
enthusiasm. John
Cridland, the Confederation
of British Industry director-general, spoke to the Guardian about his positive
overall view of the budget: “Family budgets have been under great
pressure, and by putting more money in the pockets of ordinary people, the
Chancellor has provided a much-needed confidence boost. An extra 1% off
corporation tax this year could make a big difference to investment intentions.
Plans to reduce the top rate of tax to 45p by April 2013 will show our top and
aspiring talent that this government wants them to create wealth here.”
Sir Andrew Witty, GSK's chief executive, suggested that the
"patent box" established in the budget, signifying that entitled profits from worldwide
sales of products protected by a granted UK or European patent will only be
taxed at 10% from April 2013, in comparison to the standard 24%, made Britain a
more appealing prospect for investments. This combined with falling corporation
tax had encouraged GSK to create 1000 new jobs. Paul
Mumford, senior investment
manager at Cavendish Asset Management, was equally optimistic, telling the
Guardian that the budget suggested the UK’s economic outlook was not too
austere with the “economy on the right
track.”
Although, in general terms, the budget was well
received by the business sector, some specific sectors voiced criticism. Tom Aston, KPMG, was unimpressed by the rise in Bank
Levy, declaring “…banks are being hit
with another increase in the bank levy. At a time where the more international
focused banks are already outperforming UK focused ones, today's increase may prompt
banks to again reassess the attractiveness of operating in the UK.” Defending the interests of the SME sector, Chief Executive of daily deals
for businesses site Huddlebuy.co.uk, Saurav Chopra, was unmoved by the corporation
tax cuts stating that they “do
nothing to help the millions of smaller companies that are struggling to
survive…The chancellor claims to unashamedly back business. He should be
ashamed of himself for not doing more to help businesses with soaring fuel
costs.”
Lucian Cook, director
of Savills Research, had mixed feelings about the changes to the use of
corporate vehicles to evade stamp duty: “We'll…need to look at whether transfer from
corporate to personal ownership triggers a stamp duty charge at 7%. Whilst for
domestic here is clearly a risk that this is seen as retrospective in nature
and overtly aggressive. That could impact on London's attractiveness to
overseas buyers.”
The budget met with emphatic criticism
from the Unions and provoked some apprehension from the third sector
organisations. TUC general
secretary, Brendan Barber, hit out at the dearth of
measures to assist ‘hard-pressed families’:
“[We] needed a Budget that looked to the future and made jobs –
particularly for young people – the national priority. Instead we have got a
Budget for the rich by the rich. One minute the chancellor said he found tax
avoidance morally repugnant, the next he rewarded it by cutting income tax for
the richest one per cent.”
Responding to the budget, Dr Hilary Emery, chief executive of
National Children's Bureau welcomed the Government's changes to the Child
Benefit system but said that this would be little relief for families“on the sharp end of the changes to Working
Tax Credit.” He went on to claim that the rise in the personal allowance “falls woefully short of making up for the
cuts to tax credits that low income families can claim for child care costs.”
Anna Bird, Deputy Chief Executive of the Fawcett Society, was equally
disappointed by the provisions made for women in the budget:“This budget was an opportunity to introduce
measures that would tackle female unemployment and provide a boost to women’s incomes
and opportunities. But…the policies
unveiled today will continue turning back time on women’s equality.”
Michelle
Mitchell, Charity Director General of Age UK, supported the changes to pensions and
the proposed review into increasing the state pension age saying “we recognise that as life expectancy increases it
is reasonable to consider increases to State Pension age and longer working
lives. However average life expectancy must not be the only factor that is
considered as [the] huge disparities in healthy life expectancy across the
country means that the poorest socio-economic groups will…sacrifice
proportionately more of their retirement.”
She went on to outline her concerns regarding the changes to tax
allowance adding that “someone with an income as low as £10,500 who reaches 65 from April 2013
could be £259 a year worse than under the current system with very little time
to adjust their financial retirement plans.”
ResPublica presented an alternative list of budget objectives in Seven Guiding Principles for a Better
Budget. For more
information about our research within this area, please contact patricia.kaszynska@respublica.org.uk.