The Great Debate UK

This budget will heighten income inequality

–Daniel Tarling-Hunter is an economist at Euromonitor International. The opinions expressed are his own.–

The 2012 Budget has highlighted the divide between the richest and the poorest. Two standout policies have come under scrutiny; a reduction in the top rate tax, and support for the lowest income groups by raising the personal allowance. Though these changes don’t shift the fiscal position of the government, Euromonitor International forecasts that the UK’s existing income inequality is set to widen further with more pressure on the poorest consumers.

Income inequality in the UK, measured through the Gini Index, has risen each year since the coalition government came into power in 2010. Euromonitor International expects the Gini Index to continue to rise to 34.3 by the next general election in 2015 from the 2010 figure of 33.0 (where 0 equals perfect equality and 100 equals perfect inequality). A combination of recession following the global economic downturn of 2008-2009 and subsequent fall-out from the eurozone debt crisis, and government austerity measures have all acted to squeeze the country’s lower and middle-income consumers since 2008. The latest budget will exacerbate income divides further.

The controversial 50p tax cut is a deeply ideological move. The claim that the five percentage point reduction to 45.0% will cost the government just £100 million in lost revenue is questionable given the estimates are based on a short period of data. Funding for the cut comes from closing loopholes for tax avoidance by the wealthy, an increase in stamp duty and higher effective taxes elsewhere.  However, the richest 10% of households in the UK had an average disposable income 10 times that of the poorest 10% of households in 2011.  Given the level of inequality already, many will question further tax relief affecting the richest in society.

Road privatisation can deliver huge benefits – if government gets out of the way

–Dr Richard Wellings is Director of the Transport Unit at the Institute of Economic Affairs. The opinions expressed are his own.–

The British government is finally recognising the strong link between transport infrastructure and economic growth. The Budget set out plans for a national road strategy while earlier this week the Prime Minister announced that motorways and trunk roads could be operated by the private sector.

Why have a budget?

–Tim Knox is Director of the Centre for Policy Studies. The opinions expressed are his own.–

Next year, the British government will spend £680 billion – or just under £2 billion a day, every day of the year. Remember that when considering all the noise – in both Parliament and the media – about yesterday’s Budget.

The politics of today versus the economics of tomorrow

–Sheila Lawler is Director of Politeia. The opinions expressed are her own.–

The 2012 Budget seemed to have something for everyone. For low earners there are tax cuts; for business there are cuts in corporation tax; for well-off families fearing the loss of child benefit, a reprieve; and for all who recognise that the public finances and public spending must be brought under control, there is the comfort of a ‘fiscally neutral’ budget.

The North – the more you put in…

–Graeme Henderson is a Research Fellow at IPPR North. The opinions expressed are his own.–

George Osborne made it clear today that infrastructure investment is a central part of the Coalition’s plans to help accelerate us out of the current economic downturn, but in the build up to this year’s budget, a multitude of infrastructure proposals have been vying for the Chancellor’s attention. Announcements today that there will be further investment in work on the so called Northern Hub is therefore very welcome – to be most effective, infrastructure investment has to be targeted where it is needed most, and where it will make the greatest impact.

Good luck, Chancellor

–Matthew Oakley is Head of Economics and Social Policy at Policy Exchange. The opinions expressed are his own.–

As an economist and ex-Treasury civil servant, the Budget always delivers mixed emotions for me. The 2012 Budget was no different.

Tit for tat – tax for tax

–Tony Dolphin is Senior Economist and Associate Director for Economic Policy at IPPR. The opinions expressed are his own.–

The Conservatives and Liberal Democrats agreed to co-own the first two budgets of this coalition government. The so-called ‘quad’ of David Cameron, George Osborne, Nick Clegg and Danny Alexander defended the measures in both budgets as if they had thought of them themselves.

That was a budget for growth?

–Patrick Nolan is Chief Economist of Reform. The opinions expressed are his own.–

The UK’s public finances are not out of the danger zone. This can be illustrated with a quick comparison of today’s Budget with earlier ones: in June 2010 the target for public sector net debt was expected to be 69.4 per cent of GDP in 2014-15, now it is 75.0 per cent. All up public sector net debt is still expected to increase by £440 billion over the next 5 years.