The Centre for Policy Studies welcomed the Chancellor’s decision at today’s Budget to focus on the issues of business investment and economic inactivity – and of course the news that Britain is expected to avoid recession.
On business investment, the think tank was warmly supportive of the decision to introduce ‘full expensing’, a policy it has long campaigned for. It also welcomed the indication that the Chancellor intends for the policy to be permanent – and urged him to do so as soon as possible, in order to avoid further uncertainty.
Tom Clougherty, Research Director at the CPS, said: ‘As our modelling has shown, and the Office for Budget Responsibility confirms, full expensing will increase investment and help compensate for the damage done by increasing corporation tax. Our modelling with the Tax Foundation suggested that the version of full expensing chosen could increase GDP by 0.9 per cent in the long run – but only if it is made permanent.’
On economic inactivity, the CPS welcomed the range of measures to make work more attractive, in particular the decision to abolish the pensions lifetime allowance (LTA), as called for by the CPS, and increase the annual contribution limit, as well as the reforms to make it easier for disabled people to re-enter the workforce. The focus on childcare was also welcome, in particular the increase in ratios as proposed in our paper ‘Solving the Childcare Challenge’.
Karl Williams, Senior Researcher at the CPS, said: ‘We welcome the focus on economic inactivity, and the need to keep more people in the labour force – which is of course the quickest way to boost the economy. We especially welcome the moves on pensions and the focus on mental health, which is an increasing problem for younger workers.’
The CPS also welcomed a range of other supply-side measures, including:
- enhanced R&D tax credits for research intensive companies
- the revival of investment zones across the UK
- the medical research reforms that will avoid our pointlessly duplicating the trials process in other countries
It also praised the decision to support the nuclear sector, and the time-limited extension of the Energy Price Guarantee to protect household finances.
However, it argued that the Chancellor could have been bolder in many areas. On childcare there were bonuses for childminders, but no action to reduce the extraordinary levels of bureaucracy to which they are subjected, which saw the number of providers fall sharply. Likewise the decision to exempt Cambridge from the list of new investment zones sits oddly with the Government’s earlier attempts to prioritise the OxCam arc.
Robert Colvile, CPS Director, said: ‘This was a calm, level-headed Budget, aimed at tackling the most obvious problems facing the country and the most immediate barriers to growth. In the wider context, there is still much more to do – we are still increasing personal and corporate taxes, living standards are still being squeezed, inflation is still extremely high and there is still perilously little wiggle room in the public finances. Under those circumstances, the Chancellor played the hand he was dealt about as well as he could have.’
NOTES TO EDITORS
- The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, business, welfare, education, housing and green growth, its goal is to develop policies that widen enterprise, ownership and opportunity.
- For further information and media requests, please contact Emma Revell on 07931 698246 and [email protected] or Josh Coupland on 07912 485655 and [email protected]
Date Added: Wednesday 15th March 2023