Keith Boyfield is a Research Fellow at the Centre for Policy Studies
Britain’s planning laws have proved a gold mine for lawyers and the new sub-species of lobbyists known as planning consultants in recent decades. Indeed, the Planning Bar has proved to be one of the fastest expanding branches of the UK legal system. Long-running planning inquiries into airport development or infrastructure schemes, such as power stations or rail links, have helped fund the legal profession’s move into the country house market. In turn, they have benefitted from the soaring total returns to be derived from acquiring ‘amenity’ farms in the Home Counties and Cotwolds.
But for the UK economy as a whole, the labyrinthine complexity of the planning approval system has seriously damaged our economic growth and future ability to attract direct foreign inward investment. No nuclear power station is likely to be completed before 2020, nor for that matter any significant airport runway.
By Tim Montgomerie
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Matt Sinclair of the TaxPayers' Alliance liked the populist measures - #Crosbynomics according to Matthew d'Ancona - but worried about the Budget's complexity:
"Unfortunately, the great limitation of this budget was that it relied far too much on complicated targeted reliefs instead of tax cuts across the board. Simpler, strategic tax reforms that reduce the overall burden would be fairer and do more to produce the stronger economy Britain needs."
David Skelton of Policy Exchange also welcomed what he called the "Boddingtons Budget," citing the end of the beer duty escalator and another freeze in petrol duty. He worried, however, that more could have been done on housebuilding:
“Although measures to help first time buyers are welcome, the UK is still on track to preside over the lowest level of housebuilding since the 1920s. More radical planning reforms combined with the introduction of measures such as self-build should be introduced to get Britain building.”
Professor Philip Booth of the IEA is concerned that the Chancellor's housing measures have actually learnt little from recent economic history:
"The decision to provide further Treasury guarantees for mortgages is leading the government to get involved in exactly the sort of reckless behaviour that led to the failure of major banks in 2007-2008. Any attempts to provide support for the housing market whilst not liberalising the planning system will simply lead to higher house prices and rents.”
On behalf of the CPS, Ewen Stewart commented:
“The most significant announcement today was the proposed changes to the Bank of England’s inflation targeting remit. Whilst lip service was paid to maintaining the 2% inflation target, it’s clear Mark Carney will be given significant rope to engage in even more expansionary monetary policy. So far QE, despite being larger as a proportion of GDP than that undertaken in the US, has failed to generate growth. A further loosening risks embedding inflation and sterling weakness.”
Also from CPS Kathy Gyngell echoed my concerns from earlier today about the anti-family dimension to the Budget:
“This budget is worse than nothing for the stay at home mother (the single earner couple family). Already grossly penalised in the tax and benefits system for the instinctive and reasonable choice to care for their infants at home, now this couple are meant to subsidise rich working women’s nannies.”
The Adam Smith Institute lists its good, back and ugly conclusions here.
By Paul Goodman
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The think tanks are starting to set out their stalls in the run-up to Wednesday's autumn. Today, we have a paper from James Zuccollo of Reform on Long-Term Fiscal Sustainability. He says that -
There is also a recent briefing from Ryan Bourne and Tim Knox of the Centre for Policy Studies. Three of their main recommendations are:
By Matthew Barrett
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The poll found that:
The results come as part of an analysis of the public's understanding of the Coalition’s economic policies, "A Distorted Debate: the need for clarity on Debt, Deficit and Coalition Aims", written by Ryan Bourne and Tim Knox, which is published today.
The report contrasts the aim of the Coalition - to eliminate the current structural deficit by the end of this Parliament and stem the increase in public debt as a proportion of GDP - with the reality: the cyclically-adjusted current deficit had only fallen by 13% by the end of 2011/12, and the great majority of the reduction in the deficit has come from cuts to investment spending and tax increases, not from current spending cuts. The report's authors also show that only 6% of the planned current spending contraction has so far been implemented.
By Harry Phibbs
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The Centre for Policy Studies this morning released a new report - Put the Saver First - written by pensions analyst Michael Johnson with proposals for reviving a savings culture in Britain. The paper challenges the retirement savings industry to reform itself - with lower prices and greater transparency - to avert tougher regulation.
The report says:
"The interests of the nation and the industry are not aligned. Ordinarily this would not be of great importance, but financial services are an exception. Not only does the industry directly benefit from an annual subsidy of over £30 billion (via tax relief), but the Treasury fields the consequences of industry failure, via welfare payments, made manifest by an under-saving nation.
Consequently, the industry has to change, dramatically. The guiding principle for this paper is that change would be more lasting if it were driven by the industry itself, rather than through intervention from another key stakeholder, the state. The industry is in the Last Chance Saloon of public opinion. It now has a brief opportunity (between now and 2017) to take a lead and resuscitate its reputation."
By Matthew Barrett
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Following the Queen's Speech this morning, several think tanks have reacted to the legislation announced (full details of which can be found here). I've collected them below.
8pm update: Open Europe have given their reaction to the proposed European Union Bill:
"The UK government is likely to sell the measure as a guarantee that it will never again be forced to indirectly contribute to eurozone bailout funds - a few papers have already run with that story. At the same December summit, Britain won a political declaration and an EU decision that the article that forced it to contribute to the EU-wide bailout funds, the EFSM, won't be used again (Article 122 - for background, see here and here). However, the legal status of this guarantee is uncertain. It is not part of the treaty change itself, and MPs may argue that a guarantee that isn't anchored in the Treaties could well prove ineffective. After all, the UK has received guarantees before which proved to be pretty worthless (clue: Charter of Fundamental Rights, Working Time Directive). If MPs wake up to the legal ambiguity underpinning the 'guarantee' they may ask for something firmer in return for ratifying the treaty change."
7.15pm update: Nick Pickles, the Director of Big Brother Watch, has commented on the surveillance aspects of the Queen's Speech:
"So there we have it – the Communication Capabilities Development Programme will have it’s day in Parliament. We don’t know what the draft clauses will be or when we will see them, but the Government remains intent on pursuing legislation in the coming session of Parliament. If someone is suspected of plotting an attack the powers already exist to tap their phone, read their email and follow them on the street. Instead of scaremongering the Home Office should come forward and engage with the debate about how we improve public safety, rather than pursue a policy that will indiscriminately spy on everyone online while the real threats are driven underground and escape surveillance."
2.45pm update: The Centre for Policy Studies' Head of Economic Research, Ryan Bourne has commented:
"What’s needed now is for the Government to use the Enterprise and Regulatory Reform Bill to get serious about deregulation and repealing unnecessary legislation, especially for small businesses. This should include reform of employment legislation and the recommendations of the Beecroft report. Unfortunately, the emphasis on being family-friendly will, in some areas, directly contradict this liberalisation. Flexible parental leave, for example, is unlikely to be popular with many employers. In other areas, such as tax reform, planning, infrastructure and energy policy, it’s a case of wait and hope. Though there wasn’t anywhere near enough in the way of growth bills, it was welcoming to see the Government highlight the need to see through pensions reform. Finalising the creation of the single tier pension is a sensible step. This should be undertaken as soon as possible to put the Government in a better bargaining position with the public sector trade unions on pensioner poverty. The decision to continue with the 10 year period of protection for public sector employees approaching retirement will, however, eliminate much in the way of any early cash savings from public sector pensions reform."
The Institute of Directors has commented on a number of the specific measures announced. Simon Walker, Director General of the Institute of Directors, gave his reaction to the Speech overall:
“The Government is right to place deficit reduction and economic stability at the forefront of their programme. However, we need to see them pursued enthusiastically in practice, not just in principle. To restore business confidence, which is the real key to growth, there must be drastic measures to cut costly regulation and continue to tackle the deficit. Tweaking the edges of the system will not be enough – it’s not the number of Bills that matters, it’s what is in them that really counts.”
By Matthew Barrett
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In a new report - After PFI - released yesterday by the Centre for Policy Studies, Jesse Norman MP has advocated the abolition of PFI, and its replacement with a new model of public sector procurement. Norman, the MP for Hereford and South Herefordshire, sits on the Treasury Select Committee, and set up the PFI Rebate Campaign in 2010, which led Tim Montgomerie to label him "the £1.5bn backbencher", after the expected public savings from the campaign.
After PFI shows that PFI has been one of the costliest experiments in public policy-making, causing more than £200 billion of public debt - the equivalent of £8,000 for every household in the country.
Amongst the detailed recommendations in the report are:
Tim Knox, Director of the Centre for Policy Studies, comments:
“The extraordinary cost and opacity of PFI under New Labour must never be allowed to happen again. Over £200 billion of new infrastructure is needed over the next decade. We cannot afford to get it so wrong again.”
The full paper can be downloaded here.
Ryan Bourne is the Economic and Statistical Researcher at the Centre for Policy Studies. You can follow him on Twitter here.
The only certainty that seemed to stem from the financial crisis was that the UK banking system had to undergo a process of posthumous but very necessary regulatory reform. What was not clear from the start was what the cost of such regulation would be. Now that we are seeing that this necessary but costly process has begun to impact on the long term return on equity of banks in general, it becomes clear that money invested in the crisis era may be hard to recover for a good while yet.
The cost of de-risking RBS, both in terms of its balance sheet (selling riskier business) and its regulatory capital (raising a larger buffer) has eaten into perceived future earnings and ‘book value’ – both of which drive the share price. UKFI has already made the point to HMT that the cost of a "safer" regulatory environment for banking (which may well save us money in the long run) has been to wipe value off the asset it owns - that same asset which prior to 2008 was the natural beneficiary of the lightest touch regulatory regime. Even George Osborne has begun to talk about the ‘social value’ of RBS, perhaps aware that obtaining a huge windfall to fund tax cuts in the build-up to a 2015 election now looks pie-in-the-sky.
However, RBS and Lloyds continue to suffer from further headwinds as many investors struggle to decide whether these are commercial enterprises or, in effect, government ministries. The size of the balance sheet in RBS in particular and the ruinous systemic effect that any misstep might have on the UK economy, make this an even more pressing issue. For instance, if Hester and the current management team were to walk due to political pressure, the credit market’s loss of confidence in the ability to contain the risks could be catastrophic. As such, the real questions for the taxpayer are not “what did I invest?” and “when will I get my money back?”, but rather, “are my chances of recovering my money better if the banks are back in private hands?” and “how dangerous is it to leave these companies in public hands?” With the shares in both banks far below the government’s “in-price” it becomes hard to see how all these questions can be answered simultaneously.
By Matthew Barrett
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Following the release of a report by credit rating agency Moody's, which adjusted Britain's credit rating outlook to negative, several think-tanks and campaign groups have reacted to the news.
The Institute of Economic Affairs' Editorial Director, Philip Booth, said:
"The downgrade threat from Moody’s should come as no surprise. Whilst Moody’s are correct to cite the difficulties in the eurozone as a potential threat to the stability of government finances, many of the problems facing the UK government are home grown. Public spending continues to rise and the Office for Budget Responsibility has shown that there are huge pressures forthcoming from the effects of ageing populations due to increased health, long-term care and pensions costs. Furthermore, the pressures on business coming in the form of increased regulation – including in the vital banking sector – are supressing growth. All these things mean that the UK’s top-notch credit rating is deservedly on a knife-edge."
The Centre for Policy Studies' Head of Economic Research, Ryan Bourne, wrote:
"This intervention by Moody’s is therefore a timely reminder that the Government is doing the bare minimum to address our debt problem. In the upcoming Budget, George Osborne must at the very least indicate that he would be willing to make further spending cuts should circumstances require. Furthermore, he must take opportunities to enhance medium-term growth prospects through the only non-costly, pro-growth policies at his disposal: supply-side reforms. Whether reforming the tax system, deregulating, labour market reforms or policies to improve international competitiveness, the Chancellor must surely see the need to be bold."
Tim Knox is Director of the Centre for Policy Studies which today publishes How to cut Corporation Tax (pdf) by David Martin.
We have heard rather a lot recently about how we must not tolerate “high rewards for failure”. But there is a logical corollary to that particular line: that we should be equally vehement about not imposing high penalties on success. And that is what the tax system does, not just on those individuals who pay higher rate taxes but also on business. For Corporation Tax – a tax on business profits – is effectively a tax that is only paid by successful businesses. It is money taken by the state from highly productive enterprises, money that could otherwise have been reinvested in new ventures. And it is money that is then consumed by the state, notorious for its low level of productivity.
In this way, the state penalises the only organisations which can get us out of the hole that we are in. For growth will only come from business: the state and the consumer are both far too indebted. That is why, as leading tax expert David Martin argues in his Centre for Policy Studies paper published today, George Osborne should announce in his March Budget an immediate cut in the main rate of Corporation Tax from its current level of 26% to 20%. At the same time, he could also announce his intention to reduce it even further – to 15% or even 10% once the appropriate anti-avoidance measures are in place.
Such a move would have numerous benefits: