Ahead of Wednesday’s Budget, University of Bath researchers offer their perspectives into anticipated measures from the Chancellor, offering valuable perspectives on the potential impacts. As anticipation builds for the government’s fiscal plans, academics from across the university examine the anticipated policies, highlighting their significance for the economy, businesses, and society.
Economics:
Professor Chris Martin is a specialist in macroeconomics and monetary economics from the University of Bath’s Department of Economics and is a member of the Macroeconomics and Finance Research Group.
He said: “Tomorrow’s budget is about politics, not economics. The UK needs sustained public investment in infrastructure, energy and education, to help inject growth into the flatlining economy. Without this, wages and living standards will continue to stagnate. The budget is likely to deliver the opposite: a reduction in investment to make room for ill-judged and counter-productive tax cuts.”
Bruce Morley is a specialist in macroeconomics, finance and international finance from the University of Bath’s Department of Economics and is a member of the Macroeconomics and Finance Research Group.
He said: “To allow tax cuts without increasing borrowing will require either lower public spending or increased economic growth. However most economic forecasters are suggesting UK economic growth in 2024 will be fairly sluggish and likely to be below 1% for the year. Slow growth also makes cuts to public expenditure more difficult. Currently government borrowing is approaching 100% of annual GDP, which is historically high, so increasing borrowing to fund spending or tax cuts is difficult for the foreseeable future.
“It is unclear which taxes he would cut, but he could cut corporation tax towards the new global minimum of 15%, as George Osborne did when Chancellor, which facilitated an increase in tax revenue and would probably do so again. There is a tendency for multinationals to shift profits to the lowest tax regimes through a variety of schemes, such as licensing. So moving to the global minimum would both increase tax revenue and improve UK industries’ competitiveness.”
Vaping tax:
Dr Rob Branston is Senior Lecturer in Business Economics from the University of Bath’s School of Management, and a member of the University’s Tobacco Control Research Group.
He said: “A new levy on e-cigarettes would be a win-win-win for society – deterring those who have never smoked from taking up vaping, bringing in new tax revenue for government spending, and making it easier for authorities to take action against manufacturers that don’t comply with regulation, by bringing these products within the tax system.
“Higher prices in the shops will help to deter the use of e-cigarettes, particularly for children and young adults, as long as the new tax and associated price increases are sufficiently large. Increasing tobacco tax is a crucial part of the measure, as it ensures that smokers continue to see a strong financial incentive to use e-cigarettes to quit their deadly cigarette habit.
“The two measures together should increase government tax revenues in the region of £500m per year. Ideally the government would go even further and cap the vast profits of tobacco manufacturers. If they did so and introduced a new ‘polluter pays’ levy it would raise up to £700 million a year from tobacco manufacturers, without any additional burden on consumers.”
Productivity:
Professor Mike Lewis, from the University of Bath’s School of Management, specialises in operations and supply chains, major projects and the route to achieving Net Zero.
He said: “In its questionable quest to create fiscal room for tax cuts, the Conservative government is once again eyeing public sector spending cuts. Central to this will be a call to improve public sector productivity. Public productivity has been largely stagnant since the turn of the century, but this government believes that artificial intelligence (AI) could be the catalyst for substantial leaps.
“This was underscored in the government's recent update to its public sector productivity programme, hinting at new technologies, and more specifically LLMs (large language models such as ChatGPT), potentially saving millions of working hours. As the government prepares to unveil more details in the upcoming Budget, this approach invites profound scepticism, considering the inherent challenges in modernising the wider, capital-starved, infrastructure, recruitment, and skills gaps, not to mention the very real limitations of AI.”
All the academics featured in this blog are available for interview. Please contact the University of Bath Press Office for more details.
All articles posted on this blog give the views of the author(s), and not the position of the IPR, nor of the University of Bath.
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