The Social Market Foundation's response to the Spring Budget 2023 follows below.
On childcare, Shreya Nanda, SMF Chief Economist, said:
“Changes to childcare policy are overdue – this was one of the biggest spending items in the Budget, and the OBR estimate that it will have the biggest impact on the economy, increasing GDP by 0.2% by 2027-28.
Providing greater flexibility and support for parents is important to reducing barriers to returning to work – our research has shown that a lack of affordable childcare is a key obstacle to mothers with young children returning to work. But the Government must make sure that the funding provided is adequate to provide the care promised; and to accompany the increase in funding by action to bring costs down.
It is striking that most of the expanded childcare offer won’t kick in until after the election – this potentially creates a headache for whoever is in government in the next Parliament in ensuring that it is adequately funded.”
On alcohol duty, Aveek Bhattacharya, SMF Research Director said:
“Over the past decade, taxes on alcohol have been eroded by inflation to the point that beer duty is 28% less than it was in 2013. The consequences were inevitable – cheaper alcohol means more drinking, more drinking means avoidable deaths – and thousands of people are estimated to have died as a result.
In 2019, the Social Market Foundation proposed differential duty rates for beer in pubs and beer in supermarkets to try and break this cycle. That change will come to fruition in August, and it has allowed the Chancellor today to ensure that the cheapest alcohol consumed by the most harmful drinkers will rise in price while also offering some good news to the politically potent pub trade.”
For the original SMF proposals on alcohol duty see here: https://www.smf.co.uk/commentary_podcasts/pub-relief-on-alcohol-duty-could-support-hospitality-and-reduce-harmful-drinking/
On energy bills, James Kirkup, SMF Director said:
“Extending the EPG is a sensible short-term measure, but the current patchwork of energy bill policies means that many people in real need don’t get enough help, while some wealthy households get public money they don’t really need. What Britain and its households really need is a sustainable long-term policy framework for helping with energy bills, based on a social tariff that targets help on fuel-poor households and a more ambitious scheme to insulate many more of our drafty homes.”
See our recent report with Citizens Advice here: https://www.smf.co.uk/wp-content/uploads/2023/03/Fairer-warmer-cheaper-March-2023.pdf
On fuel duty, Gideon Salutin, SMF Researcher said:
“Fuel duty cuts are a bad way to help strugglers and strivers – they’re really a giveaway to the rich. Fuel duty is mostly paid by the better off, meaning cutting that duty is little more than a tax cut for the rich, often funded by cutting services that are used by the poor.”
“Someone earning around £29,000 a year will get only half the benefit of a Budget fuel duty cut as someone on £86,000. Many of the poorest will get no benefit at all from a tax cut that will cost the Treasury billions – almost half of the poorest households in the UK don’t have a car.”
“There is no reason to think this cut won’t be permanent, wiping tens of billions from public revenue over the next five years. At a time when government is facing fresh spending demands this money should be spent where it is most needed.”
On pension reforms, SMF Director James Kirkup said:
“Abolishing the Lifetime Allowance will cost the Treasury around £2.75 billion over five years, while benefiting only the small group of workers fortunate enough to have pension pots worth more than £1 million. Most of those workers are doctors, so this might help with NHS staff retention, but it’s a lot of money to allocate to a small number of people with huge pensions – at a time when the Government’s own figures show more than 12 million people aren’t saving enough into pensions to deliver a decent retirement.
“Instead of piecemeal reform that benefits a handful of very rich people, there should be a wider review of the tax treatment of pensions that encourages higher pension savings for millions of workers who will rely on private pensions when they reach retirement.”
On immigration, SMF Director James Kirkup said:
“The entire Budget package rests on OBR growth forecasts that are built on an assumption of annual net migration to the UK of 245,000. That’s just the latest official confirmation that immigration can bring economic and fiscal benefits to the UK by giving employers access to more skilled workers.”
Sadly, many politicians who are happy to bank the economic benefits of migration lack the courage to talk honestly to the public about those economic benefits. Instead of stoking fears over Channel crossings, ministers whose plans rely on high levels of economic migration should be levelling with the public about the economic benefits immigration can bring.
On full capital expensing, Aveek Bhattacharya, SMF Research Director said:
“Britain’s chronic under-investment problem is a significant contributor to our struggling economy, and so it makes sense to incentivise companies to invest through tax relief. However, companies also want stability and certainty to give them the confidence to invest, and the fact that capital allowances are set to expire after three years, if they are maintained by whichever government emerges from the election between now and then, could reduce the measure’s effectiveness.”
On extra funding for charity Gideon Salutin, SMF Researcher said:
The Government’s announcement of an additional £120 million for the charity sector is a step in the right direction. These organisations fill many gaps in government services, particularly in isolated communities. By committing to new funding, the Chancellor has acknowledged the vital benefits charities provide for Britain’s economy and society.
However, not all charities are alike – while some bigger charities have done relatively well through the challenges of the past few years, small charities, which constitute 80% of the UK’s voluntary sector, face particular difficulties. Over the past fifteen years, they have lost 27% of their collective income. The Chancellor should therefore be targeting new funds to small and local charities who are most in need, and establishing a long term commitment to deliver funds to small charities every year.
In a report to be published next month, SMF will suggest new policies that build on today’s announcement.
On adult education and returnerships, SMF researcher Niamh O Regan, said:
“As both life expectancy and the pension age go up, people are inevitably going to be a part of the workforce for longer. Supporting adults to stay in the workforce, either by transitioning to a new career or reskilling in their current role is essential.
With the changing needs of the economy and a skills shortage in many sectors (particularly those relating to achieving net zero), it is welcome that more people will have access to the supports that will help them develop both existing and second careers for the long term and ensure that valuable skills and experience are not lost from the workforce.”
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