Spring Budget 2017: What should chancellor Philip Hammond’s headline promise be tomorrow?

Theresa May And Philip Hammond Visit Renishaw Innovation and Engineering Plant
Public spending should account for no more than 35 per cent of GDP (Source: Getty)

Sam Dumitriu, head of projects at the Adam Smith Institute, says scrap a tax:

Not all taxes are created equal, but almost all deter productive activity. Philip Hammond should look to Lord Lawson’s stint where he abolished at least one tax every Budget and took an axe to top marginal rates. So where should he start? Stamp Duty Land Tax is an obvious choice. For the relatively little money it raises (just 1.8 per cent of government revenue) it causes enormous damage. For many, it’ll be the largest tax bill they ever pay. Worse of all, it’s essentially a voluntary tax – you only pay it when you move. That gums up the housing market, putting older people off downsizing once the kids have moved out and knocking the bottom rung off the property ladder. It’s essentially a tax on mobility, trapping people in less productive parts of the country. Attempts to reform it by George Osborne, for instance by shifting the tax to the most expensive properties, have failed – revenue from properties over £1.5m fell by £440m last year. It’s time for the chancellor to admit this tax is beyond redeeming and abolish it altogether.

Julian Jessop, chief economist at the Institute of Economic Affairs, says shrink the state:

This Budget may only be a holding operation ahead of the main event in the autumn. Chancellor Philip Hammond is likely to announce a few small measures on business rates, social care and education, while raising a little more from “sin taxes” and the self-employed. But the bigger picture is still that government spending and borrowing are all too high. Despite “austerity”, overall public spending is barely changed from 2010 in real terms. Indeed, public spending has only fallen as a share of GDP because it has been outpaced by the private sector. No-one would expect the chancellor to change this picture overnight, especially given Brexit risks. Nonetheless, he could announce a longer-term aspiration to trim the state from around 40 per cent of the economy now, to no more than 35 per cent. This would require some bold choices, particularly on the NHS and welfare spending, but the ticking demographic time bomb means that we need to kick-start these debates today.

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