26 Jun 2013 15:03:47

Rolling blog of think tank reaction to the Spending Review

The TaxPayers' Alliance

Matthew Sinclair, Chief Executive of the TaxPayers' Alliance, said:

"The Chancellor has announced some welcome savings which will ease the pressure on taxpayers now and in the future, including some sensible changes to the welfare system and an attempt to end the absurdity of pensioners on the Costa del Sol getting the Winter Fuel Payment. Tens of billions of pounds are still being wasted by bloated bureaucracies each year, so there is plenty of room for further cuts. Unfortunately Mr Osborne is still boasting about squandering enormous amounts on foreign aid and vanity projects in the energy sector, while other developed economies are showing more restraint.

"The best news was on public sector pay. At the moment public sector staff get more generous pay than their counterparts in the private sector and gold-plated pensions. Mr Osborne has taken an important step towards delivering a fairer deal, although he is still planning to increase the pay of bureaucrats already receiving more than the private sector workers who pick up the bill.”

Institute of Directors

Commenting on the Spending Review, Graeme Leach, Chief Economist at the Institute of Directors, said:

“The Spending Review leaves business feeling like Oliver Twist. More please, Chancellor. Please could you go further and faster with spending restraint? Please could you shift even more expenditure from current spending towards infrastructure? Please could you widen the welfare cap to include pensions? But please could you also do less ring-fencing of spending in departments such as the NHS.”

“The Chancellor made many welcome announcements in the Spending Review, including the 1% limit to public sector pay growth and the intention to curtail automatic pay progression - regardless of performance - within the public sector. This, combined with previous policies aimed at decentralising public sector pay,  is creating a quiet revolution in public services. Taken together with the commitment to accelerate the free schools programme, the Spending Review had a radical supply-side dash.”

Confederation of British Industry

John Cridland, CBI Director-General, said:

"The Chancellor has carefully walked a tightrope of protecting growth, while making sizeable savings to pay down the debt. Infrastructure is rightly singled out as the most effective engine for growth, as we urged. While the Government talks a good game on infrastructure we’ve seen too little delivery on the ground so far. It is critical we see a real pipeline of projects announced tomorrow, so investors know what schemes are going ahead, where and when."

“Other pro-growth areas including science, innovation, skills and exports have also been shielded from cuts. The £185 million boost for the Technology Strategy Board - a crucial anchor for innovation - is particularly welcome. With stretched government finances it is tough but necessary to target automatic progression pay in the public sector. It is encouraging to see that Government will have greater control of the welfare budget through the new cap."

“The next big challenge to address is the issue of ring-fencing to ensure that efficiency flows across all parts of the public sector.”

5 Dec 2012 16:48:59

Where's the radicalism George? Think tanks worry at Osborne's "tinkering".

A few think tank reactions to the Autumn Statement...

Mark Littlewood, Director General at the Institute of Economic Affairs, focused on the big picture and the fact that Britain is becoming a high debt nation: "The Chancellor has basically stuck to his spending plans, but not to his deficit plans. Low growth and weak tax revenues demanded that he made greater reductions in spending today. His plan is now to add around £6,000 to the national debt for every man, woman and child in the UK between 2013 and 2018. By the end of this Parliament this will mean the UK’s national debt is close to £65,000 per household. It’s clear the government is still failing to take the necessary action to restore economic credibility. It’s all very well acknowledging the need to get public spending under control, but it requires substantial reform. Limiting benefit rises to 1%, scrapping the planned fuel duty increase, devolving power over teacher pay to schools and cutting corporation tax are steps in the right direction. But they are tiny, tinkering measures – not radical reforms."

Sam Bowman of the Adam Smith Institute was even more depressed at the Chancellor's lack of boldness on spending and public service reform: "Deeper cuts to public spending are clearly needed to cut the deficit, but these are not possible without a fundamental shift away from socialistic monoliths like the NHS. The only way real cuts to expenditure can be made is by shifting to more efficient, market-based models of social insurance for healthcare and welfare. The claim that we can make substantial savings by ‘trimming waste’ is a lie – and we’re fast learning what a dangerous one it has been.”

Graeme Leach, speaking for the Institute of Directors, was more positive: "Graeme Leach, Chief Economist at the Institute of Directors, said: “This was a tricky job, well done by George Osborne. Faced with a weaker outlook for GDP growth, the Chancellor needed to raise business confidence whilst at the same time keeping the deficit on a downward path. And he largely succeeded, particularly with the surprise reduction in Corporation Tax. Ideally, we would have wished for further and faster deficit reduction but political reality always made this unlikely. Our key concern is that the OBR’s growth forecasts will yet again prove too optimistic, with the result that the deficit in the out years will be much higher than forecast. Business confidence will be boosted by the corporation tax cut.”

While welcoming many of the Chancellor's measures Jonathan Isaby of the TaxPayers' Alliance expressed concern at the increasing number of people paying the 40p tax band: "The Chancellor has sent out entirely the wrong message to those earning, or hoping to earn, the increasingly modest wage where almost half of your income starts to be taken in Income Tax and National Insurance.  Hundreds of thousands of new people are being ensnared by a punitive rate of tax."

Christian Guy of the Centre for Social Justice regretted that - yet again - the Chancellor had failed to introduce a tax allowance for married couples: “The Government said it would introduce a transferable tax allowance for married couples, it is disappointing that this pledge has still to be fulfilled as it is shown that it would have a positive impact on the incomes of the poorest working households. It would also play a part in tackling the perverse incentives which currently persuade many people on low incomes  to reject  couple formation and the stability of marriage.”

25 Jul 2012 12:30:05

The Institute of Directors attacks "glacial speed" of Coalition's supply-side reforms

By Tim Montgomerie
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A few reactions to today's disappointing GDP numbers.

First from the Institute of Directors:

“Today’s figures come as a severe blow to business. The Eurozone countries show that we absolutely cannot afford to waver from the deficit reduction programme, but there are several steps the Government must take to boost the economy through supply-side reforms. New infrastructure projects financed by our low interest rates, proper relaxation of planning and employment red tape, and action to lower energy costs for manufacturers would all show Britain means business. Too often, programmes are moving ahead at glacial speed. To help unlock corporate cash piles, Government needs to show decisive leadership and a real sense of purpose.”

A similar message comes from Philip Booth, Editorial Director, at the Institute of Economic Affairs:

“An expanding private sector is the key to economic growth. The government must do more to prevent stagnation of the economy. The four key measures it could take are a serious liberalisation of planning law; deregulation of labour markets; an end to the completely incoherent “green” policies; and radical reform of the welfare state. There are many factors impeding growth that are beyond the government’s control, such as the eurozone crisis. That is not an excuse for inaction in those policy areas where the government can make a difference. Productivity and not unemployment is the main problem. As such, increasing government borrowing from current levels is clearly not the answer. It is time for bold supply side reform.”

The TaxPayers' Alliance reaction focused on the need to help the construction sector:

“Yet another quarter of economic contraction is dismal news for families already struggling to make ends meet. The evidence doesn’t support those blaming Britain’s economic woes on cuts in government spending though, as the Government and other services category actually expanded in the quarter. The most immediate problem is in the ailing construction sector. While public sector capital spending is set to be cut relatively sharply, the real problem is market uncertainty being compounded by new taxes like empty property rates, which massively increases the risk for investments in commercial property, and Section 106, an increasingly punishing tax on new developments. If the Government are serious about making the health of our economy their top priority, then they need to deliver a less onerous tax system, which doesn’t get in the way of the investment that can deliver more jobs and higher wages.”

15 Jun 2012 12:39:47

Think tanks and campaign groups give mixed reaction to Osborne bank lending plans

By Matthew Barrett
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Following George Osborne's Mansion House speech, and announcement of new bank lending programmes, several think-tanks and campaign groups have reacted to the news.

The Institute of Economic Affairs' Editorial Director, Prof Philip Booth said:

"The government has got itself into a terrible muddle over this crucial policy area. On the one hand, it is imposing huge liquidity and capital requirements on banks to reduce the potential cost to the taxpayer of bank failure. The FSA is also increasingly regulating financial product markets to reduce the flow of funds to borrowers. On the other hand, the government is bringing in a series of schemes to subsidise and guarantee lending through the same commercial banks whose lending is being restricted. Emergency measures to deal with liquidity crises are one thing. However, with regard to the fundamental policy issue, the left hand of the Treasury does not seem to know what the right hand is doing."

Graeme Leach, Chief Economist at the Institute of Directors, said:

"Facing a bombardment from the euro zone the Chancellor and Governor are calling up the reserves. Defensive measures need to be put in place and they’re making sure everyone knows they’ve done it. The extended liquidity and funding for lending schemes are welcome, but limited. The liquidity scheme will need to be massively expanded if break-up and contagion spread across the euro zone. The funding for lending scheme helps the supply of money and the demand for it, by lowering the cost of borrowing. But the core problem remains. Companies alarmed by the euro crisis will not be eager to borrow regardless of the cost."

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9 May 2012 13:53:46

Think tanks give lukewarm reception to the Queen's Speech, urging more radical economic measures

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.”

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