There are some important and very sensible announcements in the Budget:
- A two-year public sector pay freeze. Recommended in our report with the IoD last September and book this year. We'll find out more about pensions when John Hutton's review reports back.
- Abolishing the Child Trust Fund. It is great news that the Emergency Budget confirms that very sensible move.
- Cuts in welfare spending, particularly limits on individual housing benefit claims. That should put a stop to some of the worst housing benefit outrages. Hopefully the announcements today will be followed by thorough welfare reform to improve incentives to work, cut costs and stop people falling through the cracks by simplifying the system. We have a report on how to do that coming very soon.
- Avoiding overemphasising cuts in capital spending. Again, in our report with the IoD and the book we noted that the Government was already planning quite ambitious cuts in capital spending while planning a number of major infrastructure projects. At this stage it is far more helpful to identify cuts in spending, like those which infringe civil liberties that Big Brother Watch looked at yesterday.
The problem is that they have loaded a lot of the fiscal adjustment, particularly in the early years, on tax hikes. At the TPA we've been warning for some time that the Conservatives were leaning toward a VAT hike that would hit the poor twice as hard as the rich. Yesterday, we released this video:
Chart A2 in the Emergency Budget shows that over most of the income distribution the cash impact of the measures announced will be pretty similar. Poor and rich families pay a similar share of their income except the top ten per cent. A lot of money is being taken out of the budgets of poor families, the Government are making it a lot harder for millions of Britons to stand on their own two feet:
