Mark Littlewood, Director General at free market think tank the Institute of Economic Affairs, commented on the upcoming Spring statement (Wednesday 23rd March)
The Chancellor claims that he wants to lower taxes, yet is set to add further to the 70-year-high tax burden. This will not only worsen the current cost-of-living crisis but will hamper economic growth.
An increase in National Insurance Contributions is effectively a tax on jobs, and with the economy facing the headwinds of increased energy prices and higher inflation, we should avoid inflicting additional costs on businesses and individuals.
The significant reduction in borrowing last year compared with expectations leaves the fiscal headroom to reverse the NICs increase. The government should scrap it, or at the very least soften the blow this year by raising the thresholds at which people start to pay income tax and NI.
Cutting VAT on fuel and energy is popular, but would be expensive and poorly targeted. The government should instead reduce standing charges, including green levies on energy bills, the burden of which fall disproportionately on low users who tend to be poorer.
If we increase defence spending, the government must be honest about the associated trade-offs. This means savings will have to be found elsewhere.
The Chancellor should rethink his strategy and commit to bringing down the country's tax bill and reducing public spending, which has spiralled out of control since the pandemic. Otherwise, he risks impeding growth which we need now more than ever.
Notes to editors
Contact: Emily Carver, Head of Media, 07715 942 731
IEA spokespeople are available for further comment and interview ahead of the Spring Budget, as well as during and following the Chancellor's statement.