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Politics & Law Series: Expert Comment

Budget 2016: City academics react

Experts at City University London provide analysis of the UK Chancellor's March announcement

by City Press Office (General enquiries)

Academics from across City University London have provided analysis of the 2016 Budget, announced on Wednesday16th March by the UK Chancellor George Osborne.

Students on the Financial Journalism MA also provided live web coverage and features on their website, City Budget Report: www.citybudgetreport.com.


Sugar tax

Professor Tim Lang, Centre for Food Policy, Department of Sociology

Professor Tim Lang“This is good news. After appearing to resist the calls from Action for Sugar - of which, I declare, I am a founder member - the Chancellor has bowed to the overwhelming evidence about alarming childhood and adult obesity.

"In the name of children, he’s starting a sugar tax on colas. Alas, he gives the industry yet two more years before this comes in. But let’s not quibble.

"This is a step in the right direction. It also sets a precedent by ‘hypothecating’ - linking - the sugar tax to be spent on school sports.

"But why sports? Much better would have been to invest in safe bike routes to school. We need to build exercise into everyday life, not occasionally on sports fields.”

Professor Corinna Hawkes, Centre for Food Policy, Department of Sociology

According to Professor Corinna Hawkes, whose recent research into global soft drinks consumption confirmed the world's diet is getting sweeter, the introduction of a UK sugar tax is a welcome development.

She said: "Britain becomes the next country to see that taxing sugary drinks makes sense for both economics and health."


Media reaction

Tom Felle, Department of Journalism 

Tom Felle“The debate about whether British newspapers are setting the agenda or merely reflecting public opinion is a live one, especially with the divergent coverage of #Brexit and their differing political viewpoints on support for, or against, the Conservative government.

"Today’s Budget breaks along those lines with the pro-Tory press largely welcoming tax breaks and prudent budgetary management, while left-leaning newspapers have slammed the Chancellor, George Osborne, for 'cruel cuts' that will hurt the poor.

"The Sun and the Daily Mail, cheerlead for the Chancellor, with the MailOnline’s headline 'George’s sweetener' and The Sun hailing cheaper pints, an end to the 3.30pm school day and claims that 'thousands are better off with tax breaks for workers'.

"The Mirror lead’s with the Labour leader’s reaction, claiming that 'Corbyn slams Osborne and says Budget has unfairness at core'."

Jonathan Hewett, Director of Interactive and Newspaper Journalism

"Live coverage of the budget was more widespread than ever before, extending beyond the live television and radio broadcasts to which we’ve long been accustomed. Most national newspapers ran live pages on their websites, for example, from The Sun, Financial Times and Guardian to the Herald in Glasgow, plus regionals such as the Manchester Evening News.

"Many incorporated tweets from their own journalists and others, as well as other multimedia content. BuzzFeed UK ran a live video discussion on its politics Facebook page.

"Overall, this reflects a wider shift to greater real-time reporting by predominantly text-based news organisations, using Twitter and other social media channels as well as their own sites. Twitter arguably came of age for live reporting in the UK five years ago, when it was used extensively to cover the riots in London and other cities in August 2016. It has now graduated to become an almost essential tool for many reporters.

"Others, too, used social media extensively, of course, to convey their messages about the budget. The official Treasury feed sent 47 tweets during the Chancellor’s speech, for example – many incorporating images with quotes or other key points. Online searches suggest around 43,000 tweets were sent using the #budget2016 hashtag."


Infrastructure and productivity

Andre Spicer, Cass Business School

Red briefcase“The Chancellor’s speech pointed out one of the UK economy's big problems is productivity. It lags woefully behind our major competitors, and it's getting worse. Fixing the big ticket infrastructure is part of that. But gains come from dealing with less glamorous but more pressing issues, like clogged local roads or ancient rolling stock on train lines.

“Infrastructure is only one part of the productivity puzzle. Improving productivity requires high quality management, skilled workers and innovation, to create new ways of doing things. Sadly UK PLC is still plagued by the David Brent effect - incompetent managers who think they are great at their job. There are also critical skills shortages, and huge questions about whether the UK is investing to innovate in the long term. Science spending - a key driver of innovation - has been cut in recent years. Universities are also likely to cut back on basic research as new university policies are implemented."


Lifetime ISAs, business rates and tax avoidance

Professor Richard Murphy, Department of International Politics

Professor Richard MurphyThe Budget will leave “very large numbers of disabled people and their families and carers, much worse off”, according to Professor Richard Murphy.
 
Writing on his Tax Research UK blog, he said that cuts to business rate could mean that social services offered by local authority will be under threat.

Professor Murphy also said the new Lifetime ISA, which will give younger people £1,000 a year when they save £4,000 every 12 months, will aid the “very wealthiest” but said most people will never benefit.

However, in a second blog post he praised new measures aimed at preventing tax avoidance by large multinational companies.

“UK companies taken over by foreign owners who then pile then up with debt to cancel their profits will see that game brought to an end,” he said.

He added: “Companies who try to shift profits to tax havens by relocating the ownership of patents and copyrights to such places, for which they then pay a royalty, will have to pay UK tax out of the payment made. That effectively brings this income back onshore.”

In contrast, Professor Murphy said the Chancellor opened up “massive new tax avoidance opportunities within the UK”, through cuts to capital gains tax and corporation tax, combined with an increase in the point at which people will pay the highest rate of income tax.

“This was a great day for the tax avoidance industry,” he said, “but just not the bit we’re used to looking at.”

In a third blog post, he supported an announcement in the 2016 Budget report that suggested the UK was going create a tax haven list.


Budget surplus

Professor Steve Schifferes, Director of Financial Journalism

Professor Steve Schifferes"The Chancellor has had to make some heroic assumptions to ensure that he reaches his target of a Budget surplus by the end of the Parliament despite the slowing economy.

"He has projected that he will get an extra £13 billion in revenue and further spending cuts in three years time, to compensate for the larger-than-planned deficits in the next two years.

"Like many Chancellors before him, he has optimistically suggested that unspecified ‘efficiency savings’ and greater efforts to curb tax avoidance can help bridge the gap. But if the economy continues to perform below expectations, he may have to introduce more spending cuts or higher taxes later on.

"The Chancellor himself has recognised that he could be further blown off course if the international economic situation continues to worsen.

"He has already breached two of his self-imposed rules of fiscal discipline – that government debt should always fall as a proportion of GDP and that he will not exceed the fixed welfare spending cap. If the economy were to worsen, his promise to eliminate the deficit may also be under threat."

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