Budget 2016: The reaction from our panel
Jo Mitchell, Senior Lecturer in Economics, UWE Bristol
Chancellor George Osborne told us that the greatest achievement of his time in office would be to eliminate the public deficit. In 2010, he claimed this would happen by 2015. In today’s budget, he abandoned any pretence it could be achieved by 2020. The OBR’s deficit forecasts for the current parliament have been revised up in every future year until 2020 – yet in 2020 the budget deficit is predicted to suddenly evaporate. The projections are utterly implausible.
Other economic data released today confirm what many of us have argued all along: there is no long-term economic plan. Instead, the data show weakening capital investment, stagnant productivity and wages, and lower than expected growth. This is the predictable result of five years of austerity. The OBR projections make clear that these problems are home-grown, not the result of ‘global headwinds’ as claimed by the Chancellor: the OBR’s global growth forecasts have been revised down by much less than their UK forecasts.
In today’s budget, Osborne should have done what he has done in the past: stick to the message, but act flexibly. He could have stolen Labour’s clothes and announced a front-loaded investment programme, as the IMF and OECD have urged. Instead he announced regressive redistribution measures, using cuts in disability benefits to fund tax giveaways for the better off.
Today’s budget statement amounts to an admission of failure by George Osborne.
Dr Jenny Rouse, Associate Director for Centre for Local Economic Strategies (CLES)
With any Budget we should turn our focus to what announcements actually mean for communities and the people that live in them, particularly those that struggle. Previous Budgets have led to massive cuts to local services that many people depend on. Youth clubs, free legal advice clinics, domestic violence support services are all vital aspects of community provision that have been drastically reduced, leaving many with very few places to turn. With Osborne announcing that he wants to focus on the failing performance on northern schools, he should perhaps consider that many of the very cuts he has implemented have led to poor social and economic conditions that are the root of this failure.
The focus on the ‘Northern Powerhouse’ and the further devolved powers that featured in this Budget will not solve the social issues that service cuts have created. There is a focus is on transport, with £300 million committed to testing the feasibility of (not undertaking) improved transport in the north. While transport investment is welcome, we need to be focusing on social infrastructure too, and this £300 million investment should be considered in the context that this Budget announced further cuts to public spending that will lead to a net loss for the north, and other communities across the UK.
Regional inequalities may be further exacerbated by the announcement that the Greater London Authorities will keep 100% of their business rates, ahead of other regions of the country. While there has been talk of a levy on areas such as London that will benefit more from the retention of business rates, it is unclear on what that will be, and how money from this levy will be redistributed to poorer areas of the UK.
Prem Sikka, Professor of Accounting, University of Essex
There is no change in economic strategy as government continues to deliver never ending austerity for ordinary folks and tax cuts for the elites. Corporation tax is to decline from the present 20% to 17% by 2020. Capital gains tax is to decline from 28% to 20%. Money is to taken away from people with disabilities.
Economic growth is forecast to decline from 2.4% in 2015 to 2.2% in 2016, and to 2% next year. Public debt currently stands at 82.6% of GDP, but the chancellor said that next year it will be 86.2% and will then somehow decline. The government has so far not met any of its forecasts. So another doze of £3.5 billion in public expenditure cuts is to be administered. £520 million levy on sugary drinks will fill government coffers and will surely to be passed to consumers.
Support for small businesses by taking 600,000 of them out of business rates is welcome, but the Chancellor was silent on its implications for local government finances. The government has promised to tackle tax avoidance and raise £9 billion. But how? HMRC have lost around 40,000 jobs in the last decade, and more job cuts are on the way. Since 2010, there have been only 11 prosecutions in relation to offshore tax evasion. Without additional resources, the prospects of tackling tax avoidance by corporations are not very good.
It is very odd for the government to claim that wages are rising. Workers have faced wage freezes for the last six years and public sector workers can’t get more than 1% for the next four years. The official statistics show that in 1976 workers’ share of GDP in the form of wages and salaries came to 65.1%. Now it is 49.3%, the lowest ever recorded. There is nothing in the budget to boost the purchasing power or normal people.