Osborne scraps the worst tax in Britain – the ASI's reaction to the Autumn Statement
Here are our comments on today's Autumn Statement: Stamp duty:
Head of Research at the Adam Smith Institute, Ben Southwood, said:
The old stamp duty slab system was one of the worst taxes Britain had, and we welcome the Chancellor's radicalism in abolishing it, rather than simply tinkering around the edges.
According to the best economic research, raising £1 through stamp duty imposes £2-£5 of cost on the economy. Though it will still, as a transactions tax, cost the economy heavily, the reform will reduce the economic cost substantially. This is a tax cut for the squeezed middle that will make a big difference to a lot of people's lives. Politically, it could be a game-changer.
Business rates:
Deputy Director of the Adam Smith Institute, Sam Bowman, said:
A cap on business rate rises is welcome but the rates system itself needs more fundamental reform. The longer rates take to be revalued, the more distortionary the system is, penalising firms located in areas that have done badly since the last valuation. The longer the gap between rates revaluations, the greater the penalty for businesses in poorer areas and the effective subsidy for businesses in richer ones. Ideally the government should move towards a system of constantly rolling rates revaluations. If Zoopla can judge land values accurately on a rolling basis, so can HM Treasury.
Road infrastructure:
Head of Research at the Adam Smith Institute, Ben Southwood, said:
Infrastructure investment, especially into congested roads, is bound to pass a cost-benefit analysis. The problem is that we had to wait this long. If private firms could build roads, funded by tolls, then we'd likely have all of these roads already. As well as providing funds for investment, and making sure the investment goes to the most in-demand areas, pricing roads also means they get used more efficiently.
Pensions: 55% tax, tax-free inherited ISA
Director of the Adam Smith Institute, Dr Eamonn Butler, said:
The Chancellor is right to kill off the iniquitous 55% tax on inherited pensions, as well as the tax on inherited ISAs. If people have saved for their retirement but die before exhausting their nest-egg, it should go straight to their dependents, not to the Chancellor.
NHS Spending:
Communications Manager at the Adam Smith Institute, Kate Andrews, said:
The Conservatives, along with the opposition parties, are playing politics with the NHS budget. Everyone is vying to be seen as the 'party of the NHS' but no one is willing to have a serious conversation about the reforms that could make the NHS financially viable for the next ten years, let alone for future generations; like charging small fees for non-emergency visits.
It's been estimated that the NHS could fall into a budget crisis as early as 2015, which could result in cuts to core staff, longer patient waiting lists, and a deterioration in the quality of health care. While the extra £2 billion per year proposed by Osborne today will offsets short-term worries, it merely kicks the can down the road for a little while longer. Serious proposals to address the spending and demand that comes with free care ‘at the point of use’ could not come soon enough.
Personal Allowance rise:
Deputy Director of the Adam Smith Institute, Sam Bowman, said:
The Adam Smith Institute has called for the personal allowance to be raised to the full-time minimum wage rate for over a decade and it is welcome to see the government move in this direction. But the National Insurance Contributions threshold has been left untouched, which costs full-time minimum wage workers £667.68 a year. To really help low-income workers the Chancellor should make raising the National Insurance threshold one of his top priorities.
Capital gains tax on property for foreigners:
Head of Research at the Adam Smith Institute, Ben Southwood, said:
Capital gains taxes are some of the worst ones on the statute book, making society poorer by reducing the efficiency of investment and its total amount, but if we have to have them then everyone should pay them.
This is not just because of fairness, but because it causes massive distortions when different groups face different tax rates. In this case it's likely to both lead to excessive foreign ownership of property—both by favouring foreigners over natives in property taxes and by favouring property over other assets for foreigners.
Masters degree loans:
Director of The Entrepreneurs Network, Philip Salter, said:
By extending Entrepreneurs’ Relief and R&D tax credits George Osborne is backing Britain’s entrepreneurs. However, the government’s intervention in the postgraduate student loan market risks crowding out private sector solutions. Banks already provide Professional and Career Development Loans, and entrepreneurial companies like Future Finance, StudentFunder and Prodigy Finance are responding to the demand for loans for postgraduate studies. We are on the verge of the equivalent of the funding revolution we are seeing in SME finance but this intervention risks stymieing it.
The deficit:
Deputy Director of the Adam Smith Institute, Sam Bowman, said:
The deficit is still enormous and much higher than anybody expected at the beginning of this Parliament. We are borrowing £100bn this year, both because planned cuts to the welfare budget have not taken place and because the growth we have had has not translated into much extra tax revenue. But as high as this is, the Chancellor’s plans to reduce the deficit still seem credible – financial markets are lending to the country at unprecedentedly cheap levels and once productivity eventually does start to recover, things should begin to look considerably better.
Notes to editors:
For further comments or to arrange an interview, contact Kate Andrews, Communications Manager, at kate@old.adamsmith.org / 07584 778207.
The Adam Smith Institute is an independent libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.