Budget 2012 – slightly more than five out of 10
A missed opportunity peppered with serious contradictions or a step in the right direction for economic growth and public services? Three experts give us their reactions to yesterday's Budget.
'A missed opportunity' is the best phrase to describe this Budget. Although the OBR has revised its 2012 growth forecast up a notch, the figures are still extremely disappointing and we can expect slightly weaker growth (of 2.1 per cent) in 2013. As a result, real GDP will not return to its pre-recession peak until the final quarter of 2013 at the earliest.
The Chancellor needed to announce a Budget that addressed the principal problem facing the UK economy – lack of demand. He could have done this by increasing government spending on infrastructure or introducing net tax cuts to limit the squeeze on hard-pressed households, but a political commitment to austerity prevented him from doing either.
The headline measures on tax fall short. Rather than raising the personal allowance threshold and cutting the 50p rate of income tax, the Chancellor should have announced a temporary 2p cut to employee national insurance contributions. This would have provided a quick consumer stimulus in the same vein as President Obama's payroll tax cut has boosted the US recovery. He could have also offered a job guarantee for the long-term unemployed and helped more than 800,000 people who have been without work for more than a year.
The Chancellor's big giveaway to business – a quicker than expected cut to the corporation tax rate to 22p – might have sounded like a good idea to boost business investment. But firms are already sitting on huge cash piles because of the uncertain outlook for demand. Without demand-boosting measures, cutting the rate is only likely to inflate the size of the corporate cash pile and will do next to nothing to encourage firms to invest.
This is one response from a three-part article which included Mark Fox, chief executive of the BSA, and Philip Booth, editorial and programme director at the Institute of Economic Affairs. Read the full article.