Economics & Finance
March Wed 28, 2012
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.”
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