Published: 19:06 GMT, 16 November 2024 | Updated: 04:51 GMT, 17 November 2024
The head of the Institute for Fiscal Studies (IFS), Paul Johnson, has delivered a scathing critique of Chancellor Rachel Reeves's recent Budget, labelling certain tax increases as "ludicrous" and revealing his visceral reaction to the announcements. Johnson, whose organisation is widely respected for its impartial economic analysis and holds significant influence within Westminster, stated that the news prompted such a strong reaction he "literally hit the table."
Johnson's comments, described by some as those of "Westminster's fiscal referee" and "the thinking person's fiscal crumpet," carry considerable weight. Politicians across the spectrum value the IFS's objective assessments, making Johnson's outspoken criticism a significant blow to Reeves.
His primary concerns centre around the increases in employer National Insurance contributions and stamp duty. Regarding the former, Johnson expressed surprise, claiming he understood the governing party's manifesto to explicitly rule out such a measure. He further condemned the stamp duty hike, asserting that it is "the most damaging tax we have," predicting it will exacerbate immobility and further inflate rents. The Chancellor's decision to freeze winter fuel duty, he added, was equally "ludicrous."
These criticisms come amidst growing concerns about the UK's economic performance. Recent figures from the Office for National Statistics revealed that gross domestic product (GDP) grew by a mere 0.1 per cent in the three months leading up to September. Critics have attributed this sluggish growth, in part, to Reeves's perceived downplaying of the economy's prospects since taking office. Her repeated emphasis on inheriting the "worst economic situation for any new government since the Second World War" from the Conservatives has, they argue, fostered uncertainty and discouraged spending amongst businesses and consumers.
The planned increase in employers' National Insurance contributions is expected to exacerbate the situation, raising an estimated £25 billion and potentially leading to the loss of 100,000 jobs, according to analysts. Shadow Chancellor Mel Stride commented on the situation, suggesting the government is "reaping what they've sown" through negative economic rhetoric, compounded by a Budget that "has ramped up taxes, particularly those that bear down on growth."
Johnson's pessimism extends beyond the immediate impact of the Budget. He highlighted the significant long-term challenge posed by the UK's ageing population, stating that the rising costs of pensions, social care, and healthcare necessitate difficult choices. He warned that without further tax increases or increased borrowing, other areas of public spending will inevitably be cut, prompting a crucial national debate on priorities and resource allocation. The decision of what to cut, he concludes, is the countryâs next critical hurdle. The IFS head's strong words underscore the considerable challenges facing the government in navigating the complex economic landscape.
