Centre right think tanks don't like Budget's complexity

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.”

3.45pm updates....

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.

Market rents for council house tenants will be counter-productive

Alex Morton joined Policy Exchange in October 2010 as a Research Fellow in the Economics unit. His research focuses on housing and planning reform. He previously authored Making Housing Affordable: A new vision for housing policy for Policy Exchange.

The coalition has rightly made a huge issue of the six million people on out-of-work benefits and the higher poverty and government spending this caused.  Iain Duncan Smith’s long term reforms to ‘make work pay’ could save billions and cut poverty simultaneously.  That is why it is so disappointing that the coalition appears to be about to increase rents on new social tenancies toward market levels and tell these new council tenants ‘get a job and lose your home’.

Because council housing goes to those in greatest need then only 30% of new tenants have a job – the rest rely on housing benefit.  What this means is that for every £1 government gains from higher rents, they will lose 70p or so due to higher housing benefit.  These changes may stop tenants moving off welfare – because if they do they would be kicked out of their home – so the proposals may end up costing the government more in higher dependency levels than they gain in rents.

These proposals thus drive a coach and horses straight through the work of Iain Duncan Smith at the DWP.   On top of the fact that they may end up costing more than they save they will heavily increase the rents of the ‘working poor’ – e.g. families on the minimum wage who go out to work rather than live off welfare.

In addition, as these changes will only apply to new tenancies, existing social tenants will be reluctant to move – because they would lose the benefits of their existing tenancy.  To take just one example, over half of all new tenants move into a social property where the previous tenants have moved into the private sector.  Under these rules, social tenants wouldn’t leave the sector unless they were very sure they wouldn’t have to rely on social housing in future.   So while the government might gain by kicking new working tenants out of their homes after a few years, it will lose because fewer existing tenants would move out of the sector.

So the proposed measures are likely to both increase government expenditure and reduce the numbers of new social homes becoming available for new tenants.   Tenants won’t leave their existing property to enter the private sector, to get a job, to care for family members.  All this will cost the government money in the long run.

Iwould urge the government to reconsider their approach, which was not in the coalition agreement and is likely to lead to higher government spending and greater welfare dependency.  To proceed with the proposed measures would be a costly mistake.