Preparing for the Budget

Posted on February 26, 2012 by Madsen Pirie

I have been preparing for the 2012 UK Budget, due to be presented on March 21st. The Adam Smith Institute has been arguing for more pro-growth supply-side measures, which would basically involve lowering the barriers that inhibit economic activity. In particular I have advocated raising the threshold at which people start to pay income tax. It seems ridiculous that we should demand tax from those earning less than the minimum wage. For a normal working week that is about £12,000.

I have argued this for nearly a decade, but it was only when the Liberal-Democrats put into the coalition agreement a commitment to raise it to £10,000 that any progress was made. It was to be done in stages over a five-year parliament, but the talk now is that it might be done sooner.

This would make work more attractive than welfare, putting people who are presently dependent on state support into paying jobs. It would give lower paid people more money to spend, and make it easier and more attractive for small and start-up firms to recruit people. It would reduce the state’s welfare bill. All of these are good supply-side measures.

I have to be ready with those arguments and more when the budget comes, either to applaud and defend the Chancellor if he does it, or to criticize his timidity if he does not.