Reflecting on the Autumn Statement
Some of the key conclusions and recommendations contained within their report on the Autumn Statement cover housing policy, revisions to public finance forecasts, and taxation.
On housing policy, the Treasury Committee commented that were the measures taken to curb buy-to-let to have a substantial effect, they would come at a cost to the wider economy.
They explained that access to a well-functioning, affordable housing market, including for private rented properties, has been widely recognised to be crucial to labour mobility, and hence the overall efficiency of the labour market.
Labour, Conservative and Coalition governments have for decades recognised the crucial importance of maintaining confidence in the buy-to-let sector, perhaps aware of the damaging, unintended consequences of the heavy-handed regulatory interventions by both Labour and Conservative governments of the 1950s and 60s.
The Treasury Committee believe that any impediment to labour mobility will reduce employment, economic activity, and the economy’s long-run productive potential.[tweet_box]Buy-to-let property changes could impede labour mobility & damage the economy[/tweet_box]
As a result, the Treasury Committee is concerned about the focus of the Government’s housing policy.
They believe addressing the “home ownership crisis” must not come at the expense of a shortage of homes to rent and recommend the Chancellor should make clear what he intends to do to help those who want or need to rent, and to ensure a healthy supply of properties in the private rented sector.
Revisions to forecasts
During the Autumn Statement, the Office for Budget Responsibility (OBR) made revisions to its forecasts for public finances.
The Treasury Committee said the improvements to the fiscal forecast were driven not by a fundamentally better economic outlook, as the Chancellor suggested, but by changes to the OBR’s modelling and assumptions.
They claim the OBR has altered its models and assumptions in a way that is favourable to the public finances on this occasion and it may subsequently alter them in an unfavourable way.
Moreover, they believe the focus on the £27 billion cumulative change over the five year forecast period distracts attention from the fact that the annual improvements were small, and certainly of a scale that could be revised away in the future.
As a result, what was widely interpreted as a “windfall” may well prove illusory.
On taxation, the Treasury Committee says the Chancellor’s objective of moving to a “lower tax society” was not advanced by the measures contained in either the Summer Budget or the Autumn Statement.
Instead, these measures will raise the tax burden faced by individuals and businesses, through new taxes, including the apprenticeship levy and the stamp duty surcharge, and the raising of less salient ones, including dividend and insurance premium taxes.
The Treasury Committee say the need to raise further tax revenues is understandable, given the imperative to reduce public borrowing.
The “tax lock”, which prevents rises in national insurance, income tax and VAT, appears to be leading the Treasury to find additional revenues in less conventional ways.
What do you make of this assessment of the Autumn Statement? Do you think much will change when we hear details of new policies in the Budget next month?