Rachel Reeves and the government have missed a real opportunity to put our country on a growth trajectory in this Budget.
Growth in the economy can only come when the private sector starts growing and employing people. Alternatively, growth can come from large investments into the economy by the government. Unfortunately, there was nothing substantial in the Budget to push forward any of these ideas.
Today, there are 1.8m people in the 16+ age group who are looking for a job, and 9m people in the age group 16–64 who are economically inactive. This means there are nearly 11m economically inactive, i.e., not adding any value to our economy. This compares to 29m who are economically active. All those economically inactive are drawing on our welfare system and adding to our welfare budget! This Budget could have incentivised businesses to employ more workers, which was one of my submissions via the London Chamber of Commerce to No. 10.
Instead, the Budget has raised the cost of employing by raising the minimum wage, and coupled with the huge increase in employers’ NIC in the last Budget, it has created an environment where businesses do not want to increase staff. It would be far better if the cost of employing staff was made affordable so that businesses start employing. I remember in my younger days, I would not care about the level of wages but much more about getting a job, as within a few months I knew that I would show dedication and hard work to be able to claim an increase in wages.
A major advantage of shifting non-working people into jobs is that they cease to rely on welfare and start adding to the economy. Moreover, these people will come out of a depressive condition into a much more positive outlook. Such people would also cease to be a burden on the NHS.
Rachel Reeves had promised not to raise taxes for working people. Yet by freezing the allowances and the lower-rate bands, she has effectively increased personal taxes on these people; she has done this through the back door so that people do not notice.
The focus of the Budget has been to increase the welfare budget substantially. A large part will go to child benefits for families that have more than two children. The government argues that over 60% of these families are working and that 300,000 children will be brought out of poverty. However, we seem to be missing the fact that around 40% of families will receive these extra benefits, and that will ensure that the parents will not bother to look for a job. My worry is that even within the group that is working, some will be incentivised not to bother to work as their home income will now increase. Are we going to see unemployment rise?
I believe one should be ready to pay their fair share of taxes to help fund essential government spending for the wider community, ranging from the NHS to schools, etc. However, I do not see anything that is planned to ensure that such spending produces a real economic return to society. I do not see anything about improving productivity, which should be at the forefront of government policy. Increased productivity leads to growth.
Government policy must be to boost growth by incentivising those not in jobs to work hard and get employed, and those already working to benefit more by working even harder. This is so fundamental, as what good is it to have a raised minimum wage when you do not have a job? This Budget has created many more losers because it does not promote growth. Let us hope that there will be more foreign investments in the UK to increase jobs. I would rather not live on just hope!
The planned mansion tax on all residential properties over £2m is again not well thought through. Already, the Valuation Office Agency has a huge backlog with valuations and dealing with appeals. This announcement will make the backlog worse. Many are predicting a large increase in valuation appeals and deliberate attempts to play on valuations. We know that valuations are an art and not a science, and there is always a range. I am really concerned that many owners are retired and their income levels are not rising. A tax applied on a fixed and largely illiquid property will add a terrible burden on many in return for what will be a very small sum raised. This group will further pay an extra 2% tax on dividend and interest incomes, which they rely on. So, they are faced with a double whammy!
By such policies, we are driving high earners and higher taxpayers out of the country and covering welfare costs of new immigrant arrivals. Not such a brilliant equation!
In conclusion, I do not mind paying more tax for my country if it leads to more productivity, incentivises people to work, and leads to better returns from government spending.
