Pre-Budget 2013 Recommendations: A Return to Supply-Side Conservatism

Economic
Tuesday, March 19, 2013
Donna Edmunds

The Bow Group has released a 2013 Budget briefing calling for a major shift towards supply side measures to be enacted by the Chancellor. Written by the Bow Group’s new Head of Media Donna Edmunds, read and download the briefing here.

The recommended measures are, in summary:

Incentivising work:

-       An 8% tax cut for the lowest paid in society, along the Swedish tax credit model.

-       Cost of living tax cuts, including an immediate cut in VAT rates to 8%.

-       Cuts in fuel duty so that tax is no more than 50% of the cost of fuel.

-       A flat rate of vehicle excise duty to eliminate penalisation of the poorest car owners.

-       Scrapping of green energy tariffs and the subsidies they fund.

Incentivising investment

-       Capital Gains Tax to be zero rated for three years to encourage sales of assets

-       Corporation tax to drop to a much more competitive 11%. Alternately, Corporation tax to be zero rated for all company profits reinvested in the company.

-       Introduction of German style ‘mini jobs’, with earnings of up to £400 for each job zero rated. Workers to be allowed to take on as many mini jobs as they like from different employers.

Reducing spending

-       Budget cuts to be made according to the effectiveness of the funding stream, rather than simply enacting uniform cuts across all departments.

-       A firm commitment by Osborne to reduce overall spending by 3% in 2013/14.

Fairness

-       A flat rate of taxation to be introduced.

-       Simplification of the tax code to reduce avoidance through loopholes.

-       An immediate end to quantitative easing.

The paper's author Donna Edmunds commented “The recommendations emphatically call for Chancellor George Osborne to place supply side economic measures – cutting taxes and red tape – firmly at the heart of his budget, giving the British economy room to grow.

“Measures that promote progressive outcomes and spread the rewards of success across all social layers, such as a flat rate of income tax and an end to quantitative easing, are the gold standard of conservatism. Not only must they must be given top priority in Budget 2013 if  Osborne is to lead his party to victory at the next election – far more importantly, they must be given top priority for the good of the British people.”

Ben Harris-Quinney, Chairman of the Bow Group added “Despite the coalition, Conservatives expect strong conservative measures to be put forward by a Conservative Chancellor. There must be some give and take in the coalition arrangement, but when it comes to the economy, with events in Europe increasing global economic instability by the day, it is imperative that Britain’s finances not be put in jeopardy by the need to compromise and fudge on policy. The stakes are simply too great.

In order for significant and sustainable growth to occur in the UK economy before 2015, as well as cutting the deficit and lowering taxes, the Government need to focus on keeping the cost of living down, opening up access to the housing market to first time buyers, keeping lending costs low, and encouraging new industries such as shale gas extraction and 4G to flourish in the UK marketplace."