This week's Budget didn't deliver much in the way of change.

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Set-piece Budgets are a bad way to make fiscal policy. Perhaps that has always been the case. But the problem is especially pronounced now that decisions over tax-and-spend seem to be determined by an effort to game the fiscal rules, and leave the bare minimum of ‘headroom’ against a rolling, five-year debt target.

This is not an argument against fiscal rules per se. Indeed, I rather like the idea of independently verifiable rules that provide an institutional counterbalance to the state’s inherent tendency to grow. (Ryan Bourne, formerly of this parish, has written convincingly about spending caps ([link removed]) for the Cato Institute.)

The problem is the way current fiscal rules interact with our peculiar practice of Budgets as political theatre. That dynamic produces decisions on tax and public spending that are extraordinarily short-termist. They rarely embody any kind of governing strategy or sense of what we’re trying to achieve more broadly.

National Insurance, a bright spot in this week’s Budget, is a good example. In the last two years alone, employee National Insurance Contributions rose from 12% to 13.25%, then fell to 12%, 10%, and now 8%. The starting threshold was raised from £9,880 to £12,570, but then frozen as inflation reached double digits – a freeze set to last until 2028.

The Chancellor’s stated ambition to abolish employee NICs is a welcome one (we shouldn’t have two separate taxes on individual earnings). But in this context, you have to wonder whether it is going to last any longer than the ‘Health and Social Care Levy’ that led to NICs being briefly hiked, amid much fanfare, back in 2022. Colour me sceptical.

Capricious governments are hardly a new phenomenon, of course. But we are now looking at two decades in which the per capita GDP growth rate averages just 0.5% a year – about a fifth of what we managed before the financial crisis. At the previous growth rate, our wealth doubled every 28 years. Now? Try 140. This is a profound economic challenge.

It is possible to turn things around – as we discussed on this week’s IEA podcast ([link removed]) . But doing so requires that we take a much longer term view, and pursue a sustained programme of pro-growth reform across government. Our current mode of policymaking makes that harder than it ought to be.

Tom Clougherty

IEA Executive Director
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How the Spring Budget Affects the UK Economy | IEA Podcast ([link removed])

IEA Communications Officer Harrison Griffiths interviews Tom Clougherty, IEA YouTube ([link removed])

We’re in trouble… The economic warning light is on and the government seems determined to ignore it.

Spring Budget in review: Some sensible moves, a few gimmicks, but mostly a bore ([link removed])

Economics Fellow Julian Jessop, City AM ([link removed])

Banal Budget… The Chancellor avoided making anyone too happy or too frustrated.
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National Insurance cut does little to fix key economic issues ([link removed])

Julian Jessop, BBC Radio 5 Live ([link removed])

Papering over the cracks… Tax cuts may provide a short-term boost but freeing up the supply-side of the economy still matters more in the long-run.

Budget ‘hasn’t really moved us any closer to where we need to be’ ([link removed])

Tom Clougherty, The Daily Telegraph ([link removed]) , Financial Times Advisor ([link removed]) , Guido Fawkes ([link removed]) , Conservative Home ([link removed]) & Scottish Financial Review ([link removed]) .

No new direction… The Budget did little to tackle the UK’s underlying economic problems.
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** Vape Tax ‘is scientifically and economically illiterate’ ([link removed])
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In this week’s Budget, the government announced a new tax on e-cigarette liquid. IEA Head of Lifestyle Economics Christopher Snowdon called the measure ‘a deeply cynical cash grab’ and argued that ‘vapers did what the government wanted and gave up smoking. They are now being punished for it.’
Press Release ([link removed])

The ‘saint tax’ on vaping ([link removed])

Christopher Snowdon, Spiked ([link removed])

Forget ‘sin tax’… The government is actively dissuading people from the most effective method of quitting smoking.
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‘It’s a saint tax’: Backlash on Budget vape raid hitting smokers trying to quit ([link removed])

Christopher Snowdon, The i ([link removed]) , The Daily Mail ([link removed]) , London Evening Standard ([link removed]) & The Herald ([link removed])

A bad impression… Taxing e-liquid may make people believe that the risks of vaping and smoking are comparable.

IEA Latest.
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We can’t improve social mobility without economic freedom ([link removed])

Assistant Professor of Economics at George Mason University & IEA author Vincent Geloso, CapX ([link removed])

Freedom breeds opportunity… As the latest IEA research ([link removed]) explains, red tape is often the tallest barrier to social mobility.
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The green movement is stripping away life’s small luxuries, one by one ([link removed])

Energy Analyst Andy Mayer, The Daily Telegraph ([link removed])

Micro-managing misery… The EU continues its war on plastic. Brexit has not made the UK immune from doing the same.
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The case against anti-producerism ([link removed])

Kristian Niemietz, IEA Blog ([link removed])

Positive sum game… Every economic transaction that satisfies a consumer must satisfy a producer. We deny that reality at our peril.
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Stop The Tobacco Ban & Libertarianism | The Swift Half with Snowdon ([link removed])

Christopher Snowdon interviews anti-tobacco ban campaigner Charles Amos, IEA YouTube ([link removed])

Radical capitalism… Is the best way of limiting state power simply to abolish it?
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Build more housing in growth centres to boost labour mobility ([link removed])

Editorial and Research Fellow Len Shackleton, IEA Blog ([link removed])

Mobility breeds opportunity… Geographic mobility in the UK has been falling. We should be honest about the fact that moving locations is key to unlocking economic opportunity. But we also need to build the homes to make that possible.
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What the communitarian Right gets wrong about industrial policy ([link removed])

Communications Officer Harrison Griffiths, IEA Blog ([link removed])

Another failed idea that never dies… Industrial strategy is back in fashion. But it remains a bad idea.

IEA Insider.


** FUNDALIB Event in Madrid
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Director of International Outreach Adam Bartha and EPICENTER Project Manager Jacob Farley attended an event hosted by Fundación para el Avance de la Libertad in Madrid this week.

Adam spoke at the conference about the culpability of EU and European national policymakers for inflicted a dire cost-of-living crisis on Europe (as EPICENTER research from 2023 ([link removed]) highlights). He also discussed the latest EPICENTER research ([link removed]) highlighting the lack of care given to evidence-based policymaking in Europe and the worrying influence of populism and cronyism on legislation.


** Reem Ibrahim on panels in Warwick, Concord, and High Wycombe
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Communications Officer and Linda Whetstone Scholar Reem Ibrahim starred on two panels last week.

Reem joined the Warwick Women in Economics Society’s International Women’s Day Conference. She also lined up for the annual Question Time debate at John Hampden Grammar School in High Wycombe.

Her energy undiminished by the two panels, Reem also headed up to Shropshire to give a talk about the gender pay gap to students at Concord College.
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