Adam Smith Institute Budget reaction: Osborne fiddles while economy booms

For further comments or to arrange an interview, contact Head of Communications Kate Andrews: kate@adamsmith.org | 07584 778207 Commenting on the 2015 Budget Statement, Deputy Director of the Adam Smith Institute, Sam Bowman, said:

The biggest story in today’s budget was not any of the measures announced but the extraordinary strength of the UK economy.

"Employment is now at the highest level and rate in history and, although productivity growth is still depressingly low, the economy appears to be very healthy overall. Those economists who predicted at the start of this Parliament that spending cuts would lead to mass unemployment should take a lesson from this.

Financial markets have been quiet and government borrowing is extremely cheap, a sign that the government still has the confidence of the markets on long-term deficit reduction. Any doomsayers about the UK’s fiscal position are going against the collective judgment of the people who actually have money on the line.

The best policies were ones we already knew about – raising the personal allowance will leave more money in full-time workers’ pockets, and is a good tax cut for people on low and middle incomes. Most of corporation tax falls on workers’ wages so the cut to that should boost wages, with the remainder coming off investment. Raising the upper-rate threshold and cutting alcohol duty are also both welcome moves.

This budget was filled with fiddly splurges on things like the church roof repair fund, and giving Libor fines to military charities is just bizarre, but thankfully most were triflingly small.

The most depressing big announcement was the ‘Help to Buy ISA’, which will subsidise first-time buyers’ savings pots. This will stoke up demand even more in a housing market that is suffering from insufficient supply. Throwing more money at the demand side will not solve the housing crisis – the country needs planning reform so that it is easier to build on Green Belt land. The only thing this policy will Help to Buy is the election.

Overall, this was not the giveaway budget that some had hoped for – or feared. With all of the tiny changes in this, it looks like Osborne is fiddling while the economy booms.

The Adam Smith Institute is an independent free market think tank based in London. It advocates classically liberal public policies to create a richer, freer world.