CPS welcomes Government’s plan for growth
The Centre for Policy Studies (CPS) has welcomed the Government’s new growth plan, announced to Parliament this morning.
While acknowledging the daunting scale of the economic headwinds, the CPS applauds the new Chancellor’s conviction that sustainably boosting economic growth should be the primary focus of government policy, and that a mixture of tax reform and supply side liberalisation is the best way to achieve that objective. It praised the Chancellor’s commitment to bring down debt to GDP in the medium to long-term, given the crucial importance of long-term fiscal stability.
The think tank also welcomed the adoption by the new Government of many specific CPS proposals, in particular the full reversal of the ill-judged National Insurance hike (see our report National Insurance: A Plan to Blunt the Pain), the cancellation of the damaging rise in Corporation Tax (Why Choose Britain?), the creation of low-tax investment zones across the country in order to spread prosperity (A Rising Tide), and the introduction of a permanent £1m Annual Investment Allowance (A Framework for the Future).
The think tank also noted that the additional 45p rate of tax, stamp duty and alcohol duties were all taxes it had singled out as being particularly inefficient, and urged action on (Tax Cuts Don’t Have to Be Taxing, Stamping Down).
Other CPS proposals taken up in the fiscal statement included the accelerated disposal of public sector land (Saving £30 Billion: 9 Simple Steps); restricting strike action in vital public services (Strikes in Essential Services); the retention and expansion of investment schemes such as EIS, SEIS and VCTs, and the reform of the cap on pension fund charges (both Why Choose Britain?); the reform of the planning regime for nationally significant infrastructure (A Northern Big Bang); the relaxation of restrictions on onshore wind farms (The Bleak Midwinter); and the wider commitment to tax simplification and regulatory reform (A Framework for the Future).
However, CPS experts warned that today’s plan for growth should only be the beginning. For example, an uncompetitive tax regime for investments that fall outside the Annual Investment Allowance will continue to sap our growth potential, and fixing our broken planning system needs to happen nationwide – and as fast as possible.
Robert Colvile, director of the Centre for Policy Studies, said: ‘This Government has been bold and ambitious in pursuing a pro-growth agenda – not just for now, but over the long term. The challenge now is for the Government to ensure not just that we get through the current crisis, but that supply side reform translates into real improvement in people’s prosperity and living standards, whatever you earn and wherever you live.’
Tom Clougherty, research director and head of tax at the CPS, said: ‘In its overall tone, and in its specific announcements, this was the best fiscal statement in years. No one can doubt the new Government’s commitment or ambition when it comes to making Britain more prosperous and dynamic.
‘But this should only be the start of a new era of going for growth. Future budgets must deliver further reforms – and the Chancellor’s deregulatory zeal needs to be taken up and made reality across Whitehall.’
Karl Williams, senior researcher at the CPS, noted that the government was taking a different approach to the public finances than its predecessors, saying: ‘The Government is creating fiscal space for its welcome package of supply-side reforms by shifting the horizon of fiscal responsibility to the medium term. It is therefore vital for the long-run sustainability of the public finances that reforms deliver firmer economic growth and hence higher tax revenues. That will mean going further and faster on tackling the worst obstacles to growth in the months and years ahead.’