tag:theconversation.com,2011:/africa/topics/uk-budget-2016-25788/articlesUK budget 2016 – The Conversation2016-11-23T16:01:10Ztag:theconversation.com,2011:article/665312016-11-23T16:01:10Z2016-11-23T16:01:10ZAutumn Statement 2016: Tories shift to growth strategy in an Ed Balls-style pirouette<p>Needing to perform a fiscal twist in a confined space, it looks like Philip Hammond has borrowed some dance steps from former shadow chancellor Ed Balls. Despite some mockery of <a href="https://www.theguardian.com/tv-and-radio/2016/oct/24/strictly-come-dancing-ed-balls-on-to-a-winner-botch-job">his recent turns on TV show Strictly Come Dancing</a>, Balls’ footprints are clearly visible on the spending boost the chancellor unveiled in his first Autumn Statement. </p>
<p>Balls regularly castigated the 2010-15 coalition government for being too hasty to cut public spending and raise VAT. He called, in particular, for a boost to <a href="http://www.politics.co.uk/comment-analysis/2012/10/01/ed-balls-speech-in-full">infrastructure, skills and housing investment</a> on the basis that without it, a stifled economic recovery would delay the return to budget balance. </p>
<p>Six years on, Hammond has taken much the same stance. Attempts to achieve a budget surplus have been pushed elusively forward <a href="https://www.gov.uk/government/speeches/autumn-statement-2016-philip-hammonds-speech">to “the next parliament”</a>. Meanwhile, the focus shifts to boosting growth, following a forecast downgrade by the Office for Budget Responsibility, with adverse implications for tax revenues.</p>
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<p>To protect against another slowdown, additional <a href="http://www.bbc.co.uk/news/uk-politics-38075649">spending on public infrastructure</a> (especially housing, roads and telecoms) has been announced. Meanwhile, he is also slipping in some tax reductions – including a return to the 50p top rate and a reduction of taxes on in-work benefits – in case the Supreme Court’s Brexit verdict <a href="http://www.telegraph.co.uk/news/2016/11/03/high-court-to-rule-on-brexit-legal-battle-and-theresa-mays-decis/">forces an early election</a>.</p>
<p>Big infrastructure projects are a <a href="https://www.imf.org/external/pubs/ft/wp/2016/wp1640.pdf">favoured way to kickstart stalling economies</a> because they can quickly create jobs in areas that most need them. They also generate income that mostly gets spent, boosting other activity. Such projects can pay for themselves through extra tax revenues which then shrink the budget deficit in relation to GDP. Hammond’s quickstep addition is an annual <a href="https://www.gov.uk/government/news/autumn-statement-2016-some-of-the-things-weve-announced">£2 billion boost to research and development</a>, aimed at making those already in work more productive. </p>
<p>George Osborne did something similar. Following the failure of austerity <a href="http://www.bbc.co.uk/news/business-18882172">and a dip back into recession in 2011-12</a>, he quietly reinstated several of the initially-suspended infrastructure programmes. Hammond has signalled an intention to go much further <a href="http://www.itv.com/news/update/2016-11-23/chancellor-announces-23bn-productivity-investment-fund/">with an extra £23 billion</a> to be channelled in the first five years with his new investment fund. His hope is to reverse the impending slowdown and Brexit aftershocks.</p>
<h2>Selective credibility</h2>
<p>It’s not the first time that a party <a href="http://www.bbc.co.uk/news/business-33074500">committed to cautious and balanced fiscal policy</a> has veered towards plans it <a href="http://www.conservativehome.com/leftwatch/2011/08/pour-petrol-on-a-fire-rub-salt-in-a-wound-increase-debt-in-a-debt-crisis.html">once mocked as ill-timed and irresponsible</a>. A Keynesian-style stimulus – running a deficit to spur growth, and so raising national debt – has historically been easier for Conservative than Labour governments in the UK, and for Republican than Democratic presidencies in the US. </p>
<p>This is because conservatives normally push for lower taxes, based on the belief that tax reductions will actually close a budget deficit by boosting people’s ability and willingness to pay taxes. This wilts under <a href="http://www.princeton.edu/%7Ervdb/LafferCurve/LafferLaughable.html">economic analysis</a>. And when reality bites, a switch is made from taxing less to spending more on structures that can constitute a public asset as “security” for the additional public debt. </p>
<p>Labour broke the <a href="http://news.bbc.co.uk/1/hi/business/8636701.stm">deficit-boosting record in 2008-10</a> – but only after the unprecedented bailing-out of a collapsed financial sector. It had previously reduced the public debt, by moving the budget into surplus <a href="https://mainlymacro.blogspot.co.uk/2012/08/facts-and-spin-about-fiscal-policy.html">earlier in its term</a>. Yet the Conservatives, with Hammond now as chancellor, have used the idea of Labour’s “fiscal irresponsibility” to justify huge public spending cuts. </p>
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<span class="caption">Infrastructure spending.</span>
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<p>While the deficit has steadily narrowed since 2010, Osborne’s missed targets have meant the Conservative-led governments have added more to public debt <a href="http://www.bbc.co.uk/news/business-25944653">than the Labour administration they replaced</a>. Indeed, Labour governments – often elected after a boom has collapsed, and never trusted to borrow as much – have run consistently tighter budgets <a href="http://www.primeeconomics.org/articles/taq30tk04ljnvpyfos059pp0w7gnpe">than those who accuse them of reckless spending</a>. </p>
<p>Hammond’s new investment fund looks very much like the long-term investment bank that Labour has <a href="https://www.theguardian.com/politics/2016/jul/18/labour-vows-to-set-up-national-investment-bank-to-mobilise-500bn">long dreamed of</a>, and never succeeded in, launching.</p>
<p>The Conservatives argue that they can now afford some fiscal relaxation, having earned “credibility” through Osborne’s years of austerity. By drumming home the idea that they will shrink public spending to the smallest fraction of GDP <a href="https://www.theguardian.com/uk-news/2014/dec/03/osborne-plans-public-spending-shrink-1930s">since the 1930s</a> and continuing to lambast Labour for leaving such a large deficit, they manage to deflect criticism. Yet the OBR has confirmed that weaker GDP growth and tax receipts left the 2015-16 deficit at £76 billion, <a href="http://budgetresponsibility.org.uk/docs/dlm_uploads/Forecast-evaluation-report-October-2016-1.pdf">four times its £18 billion forecast</a>. </p>
<h2>Is the timing right?</h2>
<p>Chancellor Hammond can also argue that historically low interest rates on public debt make this the right time for governments to borrow more. In a world seemingly <a href="https://www.brookings.edu/blog/ben-bernanke/2015/04/01/why-are-interest-rates-so-low-part-3-the-global-savings-glut/">awash with capital</a> and large corporations sitting on <a href="http://uk.businessinsider.com/record-us-corporate-cash-holdings-182-trillion-2015-6">mountains of cash</a>, tax cuts haven’t delivered the needed boost to enterprise, so the state must take a more direct hand.</p>
<p>But the six-year gap between Balls’ and Hammond’s plans may also present problems for the Treasury. With more inflation <a href="http://uk.reuters.com/article/uk-britain-inflation-barclays-idUKKBN13G1QK">on the horizon</a> and the UK’s credit rating <a href="http://www.bbc.co.uk/news/business-36644934">heading downwards</a>, the government’s phase of virtually costless long-term borrowing is coming to an end. Even yields on long-term bonds <a href="http://www.marketwatch.com/story/global-bond-retreat-yanks-japanese-yields-firmly-above-zero-2016-11-18">are rising</a>, despite the Bank of England halving its base rate to 0.25% <a href="http://www.bbc.co.uk/news/business-36976528">immediately after the June 23 referendum</a>.</p>
<p>While big projects may cost more to finance under Hammond than if Osborne had launched them earlier, their growth-reviving benefits may also turn out to be smaller. The multiplier effect of deficit spending on national income is highest <a href="https://www.imf.org/external/pubs/ft/tnm/2014/tnm1404.pdf">when labour markets and consumer spending are slackest</a>, as they were in the UK in 2011-12. </p>
<p>Today, although the economy hasn’t grown enough to close the deficit, most of that slack has been taken up. Unemployment is <a href="http://www.bbc.co.uk/news/business-36844302">at its lowest for a decade</a>, employment at its highest <a href="http://www.recruiter.co.uk/news/2016/11/employment-remains-at-record-high/">since records began</a>, and spare resources could soon be even scarcer if the UK adopts a hard Brexit, with tight immigration controls. In these conditions, firms building the extra houses, roads and railways could find themselves bidding for additional employees and raw materials, driving up costs and prices rather than output and employment.</p>
<p>Rising labour costs are, of course, economists’ code for the higher pay which voters – and the Chancellor’s party – expect <a href="https://www.ft.com/content/d0829086-96bc-11e6-a1dc-bdf38d484582">to gain when Brexit uncertainty settles</a>. If that promise secures the government’s re-election by 2020, Ed Balls could well claim to be the ghostwriter denied a royalty.</p><img src="https://counter.theconversation.com/content/66531/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Shipman receives funding from the British Academy/Leverhulme Foundation. </span></em></p>Hammond has taken an oddly similar stance to former shadow chancellor Ed Balls: running a deficit and boosting infrastructure spending.Alan Shipman, Lecturer in Economics, The Open UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/567532016-03-23T14:44:34Z2016-03-23T14:44:34ZThe two big failures of George Osborne’s budget<p>After a rollercoaster week for Britain’s chancellor, his eighth budget has been <a href="http://www.bbc.co.uk/news/uk-politics-35877442">approved</a>. George Osborne will be breathing a sigh of relief. After proudly announcing his budget on March 16, things began to unravel just 48 hours later, thanks in part to the <a href="https://theconversation.com/why-iain-duncan-smith-resignation-registers-a-six-on-the-political-richter-scale-56574">shock resignation</a> of the work and pensions secretary, Iain Duncan Smith. </p>
<p>The furore over plans to cut disability benefits brought about a farcical backtrack on the issue and an effective rewrite of large parts of the Budget. This script could have easily formed part of an episode of the political satire <a href="http://www.bbc.co.uk/programmes/b006qgrd">The Thick of It</a>. </p>
<p>The reality, however, is that the chancellor has presided over countless failures, from missed targets <a href="https://www.politicshome.com/news/uk/economy/news/72738/george-osborne-forced-downgrade-growth-forecasts-borrowing-soars">to growth downgrades</a>. Worries over how Osborne will now fill the £4.4 billion gap that has resulted from the U-turn on welfare cuts are overblown. The UK economy remains in a <a href="http://blogs.lse.ac.uk/politicsandpolicy/budget-2016-reaction-george-rolls-with-the-blows-but-the-politics-tramples-good-economics/">poor state</a>, despite and indeed arguably because of his budgets and much vaunted <a href="https://www.conservatives.com/Plan">long-term economic plan</a>.</p>
<p>Two of Osborne’s notable failures are his fetish for a budget surplus and the unwillingness to invest and spur growth. </p>
<h2>Budget surplus</h2>
<p>Osborne has set himself the target of achieving a budget surplus by 2019-20. This target, in truth, has no basis whatsoever <a href="http://cep.lse.ac.uk/pubs/download/ea034_executive_summary.pdf">in economic theory</a>. It is a fiction invented by the chancellor that, along with connected rhetoric of <a href="https://www.youtube.com/watch?v=ir4tqvsUcOc">“living within our means”</a>, is part of a naked attempt to reduce the size of the state. It constitutes an attack on the principles of collective interest and mutual support that have underpinned <a href="http://blogs.lse.ac.uk/politicsandpolicy/31089/">the welfare state</a> in the UK from 1945 onwards. </p>
<p>In his <a href="https://www.gov.uk/government/publications/budget-2016-documents/budget-2016">latest budget</a> the chancellor loosened fiscal policy – for example, he announced several tax giveaways favouring higher earners. This pragmatism partly reflected the slowdown in growth. But the result is that Osborne faces having to make deeper cuts in the future to meet his budget surplus target. This translates into even more austerity coupled with poorer public services. One wonders why he needs to adopt such a strict budget surplus target when the realities of the economy suggest that a looser fiscal stance would be more appropriate. Perhaps ideology is ruling economic policy?</p>
<p>The truth is that the budget surplus target is neither needed nor justified. Osborne, in short, would do better to target other objectives such as that of full employment. His fiscal mandate is ultimately a distraction from the real policy interventions needed to revive the fortunes of the UK economy.</p>
<h2>Route to recovery</h2>
<p>Osborne’s second major failure relates to the routes he is using to bring about an economic recovery. In his view of the world, cuts in the budget deficit and the return to a budget surplus will be matched by a revival in the fortunes of the private sector, via higher investment or high exports (or ideally both). Growth in the private sector, he hopes, will fill the gap left by the public sector. </p>
<p>This view is wrong on several counts. First, it fails to see how the state can lead in the growth process – not just by investing in vital infrastructure, but also by supporting the private sector through, for example, <a href="http://www.theguardian.com/commentisfree/2013/dec/15/george-osborne-public-spending-taxpayers-money">an industrial strategy</a>. The fact that the <a href="http://www.independent.co.uk/news/uk/politics/budget-2016-all-the-talk-of-investing-for-the-next-generation-is-just-hot-air-a6935566.html">government has cut capital expenditure</a> is a real concern here and highlights the contradictions in the government’s own growth strategy. </p>
<p>Second, there is the fact that the UK is reliant on a budget deficit to offset imbalances in other parts of the economy. With the continuation of the <a href="https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments">trade deficit</a> and the continued <a href="http://www.theguardian.com/business/2015/feb/26/uk-business-investment-falls-at-fastest-rate-since-financial-crisis">sluggishness of business investment</a>, the budget deficit has provided a vital prop to the UK economy by adding to aggregate demand. </p>
<p>The growth of the UK economy, in recent years, has come mainly from <a href="http://www.telegraph.co.uk/business/2016/03/17/household-debt-binge-has-no-end-in-sight-says-obr/">households running deficits</a>. This is not sustainable. The government, through its use of the budget deficit, has a role to play in re-balancing growth away from consumption and towards investment. This it can do through increasing spending on capital investment projects. It can look to offset, in this case, the failure of private business to use its own excess funds to invest and export more. </p>
<p>But none of this is happening. Instead, we face the reality of the UK government sticking to an arbitrary budget surplus target that will restrict growth and lead to a more unbalanced and precarious economy.</p>
<p>Osborne’s failure, in essence, stems from his lack of understanding of basic economics. What he fails to grasp is that the government has a vital and essential role to play in supporting aggregate demand when other parts of the economy are spending too little. We should worry less about the government spending too much and focus on policies that revive investment and exports.</p><img src="https://counter.theconversation.com/content/56753/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Spencer receives funding from the EU FP7, EPSRC, and ESRC, but this article reflects the author's personal views.</span></em></p>Osborne’s budget passed after a rollercoaster week of objections and debate. But it still fails to address the parlous state of the British economy.David Spencer, Professor of Economics and Political Economy, University of LeedsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/566342016-03-22T10:41:47Z2016-03-22T10:41:47ZFailures and u-turns: the Conservative Party’s record on welfare<p>Welfare reform and its implementation has been a crucial test for the Conservative Party’s rebrand. Since returning to government in 2010, it has made concerted efforts to discard its nasty party image and has <a href="https://www.gov.uk/government/speeches/pm-speech-on-opportunity">sought to revive its more compassionate “one nation” heritage</a>. The resignation of Iain Duncan Smith as Work and Pensions Secretary has thrown this strategy into question. </p>
<p>In a parting blow, he <a href="http://www.bbc.co.uk/news/uk-politics-35855004">criticised the government</a> for being too intent on cutting the deficit with welfare cuts that are going too far. Reforms to disability benefits were the straw that broke the camel’s back for Duncan Smith and precipitated his resignation. But what about the numerous cuts that preceded this policy to save £4 billion by 2020-21? </p>
<h2>Universal credit</h2>
<p><a href="http://www.telegraph.co.uk/finance/budget/7846849/Budget-2010-Full-text-of-George-Osbornes-statement.html">Top of the Conservative Party’s agenda</a> has been eliminating the national deficit, with numerous savings being found in the welfare budget. </p>
<p>Duncan Smith’s flagship policy was the universal credit initiative. The move to streamline a whole range of welfare benefits into a single payment seemed logical, as it saved both costs and administrative effort in the process. </p>
<p>There have, however, been some major problems with implementing universal credit. Launched in October 2013, it has so far been rolled out to just 203,000 people, <a href="http://www.newstatesman.com/politics/welfare/2016/03/think-iain-duncan-smiths-resignation-masterstroke-sadly-hes-not-clever">all of whom are single men without dependents</a>. Where it has been trialled, there have been both <a href="http://www.bbc.co.uk/news/uk-35145845">late payments</a> and <a href="http://www.insidehousing.co.uk/universal-credit-pilot-hit-by-payment-error/6523798.article">under-payments</a>. It has also created some major practical difficulties, for example where housing benefit has been <a href="http://www.theguardian.com/housing-network/2015/jun/12/universal-credit-u-turn">paid straight to tenants</a>, who prioritised it for other essentials and generated further personal debt, rather than landlords. </p>
<p>Supporters say the policy ultimately will instil greater individual responsibility into the UK’s welfare system. But <a href="http://www.frankfield.co.uk/latest-news/articles/news.aspx?p=1021182">critics</a> have argued that its key consequence has been to further disincentivise and impoverish those reliant on the welfare state within the poorest sections of society.</p>
<p>Either way, it is becoming apparent that the scheme is facing some major problems and has not materialised as envisaged nor on schedule.</p>
<h2>The welfare cap</h2>
<p>The so-called <a href="https://www.gov.uk/benefit-cap">“welfare cap”</a> was a deliberate byproduct of the highly significant Welfare Reform Act, a law passed in 2012. It imposed a limit on the amount of benefits that any family could claim, which from April 2017 will be £23,000 – or approximately £440 a week – in London and £20,000 in the rest of the UK. Since resigning, Duncan Smith has criticised the cap as <a href="http://www.huffingtonpost.co.uk/2016/03/20/iain-duncan-smiths-andrew_n_9510040.html">arbitrary</a>. </p>
<p>The cap seemed to have public support, yet it did generate further hardship for some genuine cases and there are questions over <a href="https://theconversation.com/the-benefits-cap-doesnt-work-heres-why-36917">how much it really has saved</a>. </p>
<h2>Work Programme</h2>
<p>A central idea that has underpinned the Conservative Party’s welfare reform is the idea that nobody should be better off on benefits than they would be in work. So the logical next step for those experiencing the financial pinch of benefits reform, is that they are helped to find work. Cue the Work Programme, which was introduced in 2011 and was targeted at older workers and the longer-term unemployed. </p>
<p>This much-heralded policy has been criticised for forcing welfare recipients to work in often inappropriate situations or lose their welfare payments (referred to as “workfare”). In late 2015, the Commons Work and Pensions Select Committee <a href="http://www.bbc.co.uk/news/uk-politics-34588859">criticised</a> the fact that 70% of those enrolled on it have failed to find long-term employment. But it is deemed to have produced the same results as previous programmes at a greatly reduced cost.</p>
<h2>Bedroom tax</h2>
<p>But what of the much-maligned bedroom tax or, as the government would rather you call it, the spare room subsidy? Introduced in 2012, it has sought to address the spiralling housing benefit bill and has reduced housing benefit payments for those deemed to live in houses too big for the size of their family. </p>
<p>But the apparent inflexibility of the policy to acknowledge specific individual circumstances has generated a raft of criticism and some tragic stories of vulnerable people <a href="http://www.theguardian.com/society/2016/feb/29/disability-campaigners-supreme-court-bedroom-tax-discrimination-case">suffering as a result</a>. </p>
<h2>Tax credits and the living wage</h2>
<p>The Conservatives also tried to reform tax credits. Plans to cut £4.4 billion in tax credits were scrapped after an <a href="https://theconversation.com/tax-credits-showdown-for-once-public-opinion-may-be-with-the-house-of-lords-49774">embarrassing defeat</a> in the House of Lords in October 2015. An improvement in public finances at the time of the Autumn Statement enabled the chancellor to ditch the cut. </p>
<p>These cuts <a href="http://www.theweek.co.uk/66013/are-800000-people-still-going-to-see-their-tax-credits-cut">may yet still occur</a> and, in the meantime, the Cameron government is proposing a national living wage as a further means to entice people away <a href="https://theconversation.com/budget-2015-living-wage-offers-rabbit-out-the-hat-but-magic-will-be-needed-later-44372">from the benefits culture</a>.</p>
<h2>And finally … disability cuts</h2>
<p>The u-turn on the £4.4 billion tax credit cut appears to have contributed to a financial hole Osborne has had to fill. The latest budget proposed £4 billion of reductions to the <a href="http://uk.businessinsider.com/george-osbornes-disability-cut-explained-2016-3">already diminished welfare budget</a> for the disabled. This has had toxic implications for the party’s image, and for Iain Duncan Smith it appears to have been a cut too far. </p>
<p>His mission was to streamline welfare spending, but still protect the long-term prospects of the most vulnerable. And, in resigning, Duncan Smith has played up his commitment to compassionate conservativism. Yet his record shows he oversaw numerous cuts in what was a chequered record at the Department of Work and Pensions. </p>
<p>Regardless of the motives for his dramatic resignation, this latest eruption highlights the ongoing difficulties of addressing the ever-growing welfare bill of an ageing and expanding population, especially alongside a commitment to cut the deficit. It also questions the Conservative Party’s repeated claim that <a href="http://shop.conservatives.com/product97024/were-all-in-this-together-poster.aspx">“We’re all in this together”</a>.</p><img src="https://counter.theconversation.com/content/56634/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ben Williams is a member of the Labour Party and the Higher Education Academy (HEA).</span></em></p>Cuts to disability benefits were the latest in a series of unpopular and unsuccessful attempts to reform welfare.Ben Williams, Tutor in Politics and Political Theory, University of SalfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/489112016-03-21T18:09:59Z2016-03-21T18:09:59ZFour simple steps the UK government follows to make you really, really rich<figure><img src="https://images.theconversation.com/files/115819/original/image-20160321-30912-j1jk4j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cash in hand. Start rich to get richer.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/59937401@N07/5857426536/in/photolist-9VAQQG-9VByc5-9VDaWY-9kNZEL-9VBgGi-9VBzSG-9VCzps-9VwzJV-9VCwLq-9VBaMr-9VALmE-9VB7jC-9VDKoY-6Nfq1h-9Vzk46-9VAQ4b-9kP1zQ-9VAuME-9kJE8x-9kP2U7-9VAub5-9kMGKG-9VxCXn-9VAMK9-9VzHe8-9VAn7m-9VxFgX-9VAF9B-9VDxpf-9VANzf-bRAZ3H-in6yLn-9Vy2Q6-bACF1-9VzeFx-9VxWEK-6SF8Ar-9VxN1g-9VDwno-c9g7k1-9VD4DS-7W8S5L-8tHQUr-9VB5fh-9Vy4xV-9VDkGC-5LEiQ7-9VAwVp-9VC2s1-9VAoEj">Images Money/Flickr</a></span></figcaption></figure><p>Can your government help make you wealthier? If so, UK chancellor of the exchequer, George Osborne, and the prime minister, David Cameron, have ticked all the boxes with their latest budget. The <a href="https://theconversation.com/why-iain-duncan-smith-resignation-registers-a-six-on-the-political-richter-scale-56574">departure of Iain Duncan-Smith</a> and a <a href="https://theconversation.com/sorry-jamie-oliver-id-be-surprised-if-sugar-tax-helped-cut-obesity-56471">new sugar tax</a> may have dominated discussion over the past few days, but it is the extension of a generous tax system, less penalties on capital income and less tax liabilities for corporations which mark out the fundamental ideology at play.</p>
<p>There is only one catch. The budget will only make you better off if you are already better off than the majority of UK residents.</p>
<p>With the term “inequality” thrown about quite a bit of late, a budget like this offer an ideal chance to see inequality in action: to see how the gap between rich and poor is maintained or worsened, and what its social consequences are. Government policy plays an important part in this. Here is how it works, in four simple steps. </p>
<p><strong>1. Shift the tax burden from the best to worst off</strong></p>
<p>Capital gains are a <a href="http://piketty.pse.ens.fr/files/capital21c/en/pdf/F3.1.pdf">key income component</a> of the wealthy. Disposing of profitable assets such as shares carries a charge, the top rate of which is now reduced in this budget <a href="https://www.gov.uk/government/publications/budget-2016-documents/budget-2016">from 28% to 20%</a>. This is great news for early entrants to the property market, especially those in London where property price growth rates <a href="http://data.london.gov.uk/housingmarket/#regprice">marginally exceeded</a> the English average last year. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/115824/original/image-20160321-30908-1uwd83m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/115824/original/image-20160321-30908-1uwd83m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115824/original/image-20160321-30908-1uwd83m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115824/original/image-20160321-30908-1uwd83m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115824/original/image-20160321-30908-1uwd83m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115824/original/image-20160321-30908-1uwd83m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115824/original/image-20160321-30908-1uwd83m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115824/original/image-20160321-30908-1uwd83m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Ramping up the property ladder.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/digallagher/4880167882/in/photolist-hs8KyG-a7ZnoY-8rf8Ty-4JMJA7-ovyqJr-cTLZt-7xP5CY-onwqwr-oLZDbw-8SZuYZ-9jZ3qt-9bTXKk-7MeJ4g-rvgxg-6VzkFz-5PEux-bNqJs2-e7cciH-e7cbZR-e7cbET-rreomS-gvvbLF-oYvpWK-di8QQy-ae67S8-awuoHx-fEtAjo-dSMqSo-9or5z2-dSFBwM-c9qgbQ-atpcZU-a8v8r7-rv7QA3-aCxYfc-dSFBEr-dSMbwq-dSFBCV-dSFByT-dSMbzU-dSFBBD-dSMbvy-9LJ3RK-dSFBwZ-dSFBDP-dSFByx-dSMbyA-a5uRL9-dSMqSL-dSMbzE">Diana Parkhouse/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>With financial sector growth now recognised as a key contributor to the rising gap between rich and poor, this measure looks set to drive a wedge further between those dependent on earned income, and those with access to “rentier” income sources such as property. And better-off people without access to capital are not forgotten. With the higher income tax threshold raised to £45,000, those on above-average earned incomes will reap substantial benefits. </p>
<p>It is also well established that indirect consumption taxes <a href="http://journals.cambridge.org/abstract_S0007123407000348">disproportionately harm</a> the less well-off. While direct taxes such as capital gains lend themselves better to income redistribution, consumption taxes such as VAT – and now the sugar tax – take a greater percentage of the income of low earners. Rather than pursuing the producers, this government has chosen to hit the consumer. </p>
<p><strong>2. Lower taxes on corporations</strong></p>
<p>The direct effects of this measure are more difficult to see. The secret to its negative effects rests in the practice of <a href="http://www.forbes.com/2010/06/24/tax-finance-multinational-economics-opinions-columnists-lee-sheppard.html">transfer pricing</a> by multinationals. In a higher-tax regime (such as the US) compared to a low-tax one (such as the Republic of Ireland, and now increasingly the UK), minimal policing of tax avoidance encourages some very creative accounting. In Ireland, recorded Gross National Income (GNI) over the last ten years has been up to 15% lower than Gross Domestic Product (GDP). GNI typically excludes the effect of multinational transfers. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/115829/original/image-20160321-30929-5qltbh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/115829/original/image-20160321-30929-5qltbh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115829/original/image-20160321-30929-5qltbh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=349&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115829/original/image-20160321-30929-5qltbh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=349&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115829/original/image-20160321-30929-5qltbh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=349&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115829/original/image-20160321-30929-5qltbh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=439&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115829/original/image-20160321-30929-5qltbh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=439&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115829/original/image-20160321-30929-5qltbh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=439&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">All is not what it seems…</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/dennis_matheson/3647166332/in/photolist-6yhFu9-a2grdq-qDmv1J-g9rbv-bDydoh-6SsMUs-qG62Td-g9raP-f9o9TQ-574bHL-aDnFee-5UxchZ-6SsN3L-579Sn5-aDnGer-g9r8H-aDrxRA-aDryiw-8B2rL4-641acw-VxBP-8FKJfM-62yi9W-pDE5fR-qJnPAF-bSsWvi-2eDwf-bDycXN-bSsWn8-g9r9X-8yKGcC-bSsWjc-g9rcp-bW3b6r-54cjvP-nfZvxc-ynLBKq-bSsWHZ-bDydFG-91BVHk-xQ3Xi-5dz1Zn-piRWm3-2BB46k-66jegG-ikhUzd-bDydxo-bDydCN-g9rd7-adHLWD">Dennis Matheson/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>This means nothing for the real economy – there are no jobs or local spin-offs associated with this false output. Yet our reliance on GDP to measure social progress is flawed as a result, and could encourage complacency on more important policy goals such as quality job creation. It is great for corporate share prices however – and thanks to that reduction in capital gains tax, the long-term combined pay-off could be substantial.</p>
<p><strong>3. Cut benefits</strong></p>
<p>The negative public and political <a href="http://www.independent.co.uk/news/uk/politics/stephen-crabb-to-formally-drop-curbs-to-pip-disability-payments-as-david-cameron-attempts-to-defend-a6943721.html">reaction to the proposal to cut Personal Independence Payments</a> has been encouraging – and perhaps a sign of the mask slipping. While it may be easy to dress core benefit cuts in the guise of “labour activation”, cuts to disability payments are ethically (never mind economically) unjustifiable. So unconscionable was this particular proposal, that <a href="https://theconversation.com/iain-duncan-smith-and-george-osborne-a-battle-for-the-conservative-soul-56651">Duncan-Smith</a> had the <a href="http://www.theguardian.com/politics/2016/mar/18/iain-duncan-smith-resignation-letter-in-full">decency to resign</a> (we won’t get mired in discussion about his motivations here) and the idea <a href="http://news.yahoo.com/british-pm-drops-welfare-cut-sparked-ministers-resignation-173339117.html;_ylt=AwrC0ww8NfBW2BoAgLLQtDMD;_ylu=X3oDMTByOHZyb21tBGNvbG8DYmYxBHBvcwMxBHZ0aWQDBHNlYwNzcg--">eventually got dropped</a> entirely. </p>
<p>Social transfers play a key role in minimising the gap between rich and poor, but this effect is only realised in a system where those who can most afford it pay their fair share and acknowledge that their wealth is at least partly dependent on the cheap and unregulated labour of others. With no sound economic justification (how can you cut benefits in the name of austerity whilst simultaneously shrinking the tax base after all?), this perverse logic can only be ideological. A commitment to the longstanding caricature of the undeserving poor and a parallel commitment to looking after privileged constituents. In IDS’ own words: </p>
<blockquote>
<p>It looks like we see benefits as a pot of money to cut because they don’t vote for us.</p>
</blockquote>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/115831/original/image-20160321-30912-ofqdmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/115831/original/image-20160321-30912-ofqdmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115831/original/image-20160321-30912-ofqdmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=402&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115831/original/image-20160321-30912-ofqdmv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=402&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115831/original/image-20160321-30912-ofqdmv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=402&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115831/original/image-20160321-30912-ofqdmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=505&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115831/original/image-20160321-30912-ofqdmv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=505&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115831/original/image-20160321-30912-ofqdmv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=505&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">IDS plays the room.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/cabinetoffice/14726270562/in/photolist-kpWzZR-qnhQqp-bq4jS1-pLHdRD-aQRUUz-r4ypdQ-dwz9wW-e7ufVa-dwz9Z3-uGTQqR-qiW5fg-oriZbA-bnUg1G-9iVw79-qJuJcL-8HuZTX-B1Q8jt-ueXiv3-q2dBiy-qiHyTw-q2kn8K-sow97M-xe2WEY">Cabinet Office/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p><strong>4. What else?</strong></p>
<p>It doesn’t stop with the budget. If successful, the <a href="http://www.theguardian.com/politics/2015/jul/15/trade-unions-conservative-offensive-decades-strikes-labour">Trade Union Bill</a> will restrict the ability of labour to strike by introducing new rules on balloting, advance notice periods, mid-strike ballots and stricter regulation of pickets. This will further reduce worker’s bargaining power and produce a more favourable environment for employers better able to discipline labour costs, which will do no harm to share prices.</p>
<p>Implementation of the full range of benefit cuts will be spread across the lifetime of this government, compounding the pain year-by-year, while capital-rich individuals enjoy a windfall. Low-income individuals now face a squeeze from a number of directions. Their income security has been threatened through benefit cuts such as the now rejected proposed reduction to Personal Independence Payments, reduced benefit cap thresholds and freezes on working-age benefit rates. With a 15% rise, to 801,000, in the number of people on <a href="http://www.theguardian.com/uk-news/2016/mar/09/uk-workers-on-zero-hours-contracts-rises-above-800000">zero-hours contracts</a> since 2014 and a sustained assault on unions eliminating a key line of resistance to casualisation, these are likely to be trying years. </p>
<p>Worst of all, perhaps, is the frustrating insidiousness of the way these changes are justified through the government’s unremitting austerity mantra. They fly in the face of <a href="http://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion">empirical evidence</a>; force former cheerleaders like IDS to resign; and spark <a href="http://www.theguardian.com/uk-news/2015/nov/25/george-osborne-u-turn-scrap-tax-credit-cuts-autumn-statement">embarrassing U-turns</a>. At least Margaret Thatcher had the decency to wear her ideology on her sleeve.</p><img src="https://counter.theconversation.com/content/48911/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Eoin Flaherty does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When the excitement over cabinet resignations and the sugar tax subsides, the 2016 Budget acts as a blueprint for making the wealthy wealthier.Eoin Flaherty, Lecturer in Sociology, Queen's University BelfastLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/565202016-03-18T13:30:13Z2016-03-18T13:30:13ZLifetime ISA: there’s a big part of the ‘next generation’ it will do little for<figure><img src="https://images.theconversation.com/files/115589/original/image-20160318-4450-mrxr6a.jpg?ixlib=rb-1.1.0&rect=6%2C210%2C4249%2C2605&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It won't be a windfall for everyone.</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>The mission statement for the 2016 budget delivered by George Osborne is to “put the next generation first” – a group he referenced 18 times in <a href="https://www.gov.uk/government/speeches/budget-2016-george-osbornes-speech">his speech</a>.</p>
<p>The new lifetime ISA is fundamental to achieving this. Osborne touted it as “a completely new flexible way for the next generation to save”. But a closer look at the terms and conditions of the new ISA shows there are many it will not benefit.</p>
<h2>So, what is it?</h2>
<p>Starting in April 2017, savers aged between 18 and 40 who open the new lifetime ISA and put in up to £4,000 a year will get a 25% top-up from the government until they reach 50. That means a maximum of £128,000 in personal savings that will be topped up to £160,000 if you start at 18 and continue for the 32 years the ISA is available.</p>
<p>After the first 12 months of saving, investors can use the lifetime ISA balance to buy a house, provided it is a first-time purchase that costs no more than £450,000. And balances from the current Help-to-Buy ISA can be transferred across. After the age of 60, savers can withdraw funds “for retirement” free of tax. It is not clear whether that means the saver has to actually retire or just needs to be over 60.</p>
<p>Any withdrawals by savers under 60 who aren’t buying a house (unless they are terminally ill) will have the government top-up (plus any interest on it) deducted, and also suffer a 5% tax charge.</p>
<h2>Inflexible</h2>
<p>It is questionable how useful this new lifetime ISA is for the next generation. First off, it is not very flexible. Savers needing to draw money out before they reach 60 will be penalised if it is not being withdrawn for a first-time house purchase (or terminal illness). There is a dearth of opportunities for short or medium-term saving, and the budget offers no solution. </p>
<p>The Treasury’s own <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508147/PU1912_Policy_Costings_FINAL3.pdf">Policy Costings</a> are also vague about what it will cost. The Treasury admits that:</p>
<blockquote>
<p>The main source of uncertainty is the behavioural impact, because the cost of the top-up is extremely sensitive to it. In particular, assumptions are made about: the number of people choosing to use the lifetime ISA; how much they choose to save; and when they choose to withdraw. </p>
<p>There is little information that can be used to inform these assumptions and the behaviour is dependent on a variety of other factors, which amplifies the uncertainty.</p>
</blockquote>
<p>Based on these uncertainties, the Treasury says it could cost £850m to service these ISA savings by 2021 – but this might be less or it might be more.</p>
<p>It all depends on the number of next generation members who can afford to use it. The £4,000-a-year maximum would be challenging for people on the median household disposable income, which for 2014-15 was £25,600 <a href="http://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/nowcastinghouseholdincomeintheuk/2015-10-28">according to the Office for National Statistics</a>.</p>
<p>On the other hand, as the Office for Budget Responsibility (OBR), the UK’s fiscal watchdog, <a href="http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf">points out</a>, wealthy parents could give their over-18 offspring an annual £4,000 for the ISA, attracting the £1,000 a year top-up.</p>
<h2>Knock-on effects</h2>
<p>The lifetime ISA joins up with the Help-to-Buy Scheme, currently viewed as having <a href="https://theconversation.com/help-to-buy-isas-will-end-up-feathering-nests-of-the-wealthy-heres-how-39031">boosted UK property prices</a> – by an average of £8,250 according to a <a href="https://england.shelter.org.uk/__data/assets/pdf_file/0010/1188073/2015_09_how_much_help_is_Help_to_Buy.pdf">2015 Shelter study</a>. The OBR <a href="http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf">warns</a> that the new ISA will only increase demand for the relatively fixed supply of UK housing. It estimates that this could lead to an additional 0.3% increase in house prices. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/115591/original/image-20160318-4425-16d9osw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115591/original/image-20160318-4425-16d9osw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115591/original/image-20160318-4425-16d9osw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115591/original/image-20160318-4425-16d9osw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115591/original/image-20160318-4425-16d9osw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115591/original/image-20160318-4425-16d9osw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115591/original/image-20160318-4425-16d9osw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Up, up and away – house prices, that is.</span>
<span class="attribution"><span class="source">shutterstock.com</span></span>
</figcaption>
</figure>
<p>The ISA has another possible function, as a first step in a move towards an ISA-based regime for pensions. Instead of getting tax relief on pension contributions (as you do now), people using a pensions ISA would contribute from income after tax, but get their retirement income from it tax free.</p>
<p>Critics claim that this change may deter savers, as well as creating confusion while the new auto-enrolment scheme is still bedding down. The Association of British Insurers has been very cautious in welcoming the new ISA, <a href="https://www.abi.org.uk/News/News-releases/2016/03/Budget-2016-ABI-reactionhttp://example.com/">commenting</a> that it “must not be a back door to a pensions ISA”. But there is <a href="https://www.hymans.co.uk/news-events/newsroom/if-everyone-under-40-switches-to-a-lifetime-isa-the-treasury-will-net-1bn-per-year.aspx">agreement in the industry</a> that the new ISA is a likely step in that direction.</p>
<p>The new lifetime ISA also looks like a move toward asset-based welfare. This is where welfare policies are made not simply because they are helpful for as many people as possible – like social housing or nationalised health services. The lifetime ISA is aimed at a particular set of relatively affluent individuals who can afford to save for the long term. </p>
<p>Many of the next generation will never be able to save; some won’t be able to start at 18 (and maybe not even at 40) and some won’t be able to leave a lot of money in an ISA for the long term. George Osborne’s new lifetime ISA has little to offer those members of the next generation.</p><img src="https://counter.theconversation.com/content/56520/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Josephine Maltby does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A closer look at the terms and conditions of the budget’s flagship scheme for savers shows it won’t benefit everyone.Josephine Maltby, Professor of Accounting and Financial Management, University of SheffieldLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/563832016-03-18T12:01:34Z2016-03-18T12:01:34ZExplainer: what raft of education reforms mean for England’s schools<p>The Conservatives show no sign of slowing down the pace of education reform in England and made a flurry of new announcements on changes to the school system. After the headlines about George Osborne’s budget announcement that all schools must be on track <a href="http://www.bbc.co.uk/news/education-35815023">to becoming an academy by 2022</a>, more detail on this and a raft of other reforms have been published by Nicky Morgan, the education secretary, <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508447/Educational_Excellence_Everywhere.pdf">in a new white paper</a>. </p>
<p>The key principles of these changes is to increase schools’ autonomy to make their own decisions, and focus on the quality of education by monitoring the outcomes of pupils. </p>
<p>By transforming all schools in England into academies, the Conservatives aim to totally transform schools by the time the next election comes along – finally taking <a href="https://theconversation.com/an-obituary-farewell-to-your-local-education-authority-56387">local authorities out of running schools</a> altogether. The majority (61%) of secondary schools <a href="http://www.bbc.co.uk/news/education-35815023">are already academies</a> – 2,075 out of 3,381. But the picture in primary is quite different – only around 15% of primary schools are currently academies. Converting all of them will be a huge task, not least for the Department for Education in managing the process. </p>
<p>The academies policy also creates a big challenge of governance. It’s unclear whether we can find enough high quality governors to run all our schools well. One way of solving this problem might be to get schools to join together in multi-academy trusts (MATs), otherwise known as academy chains. The white paper suggests that “most schools will join or form MATs”. </p>
<p>But this will only partially solve the problem. While some academy chains such as Harris or ARK have been highly effective, <a href="http://www.suttontrust.com/wp-content/uploads/2015/07/Chain-Effects-2015.pdf">others have had major issues</a> in terms of quality of performance. </p>
<p>The white paper suggests a strong role for the eight existing Regional Schools Commissioners in monitoring the quality of academy chains and intervening where necessary. In addition, measures have been proposed to increase the role of parents, who will be allowed to petition to have a school moved to another chain. </p>
<p>There will also finally be the publication of accountability and performance measures for MATs, something <a href="https://theconversation.com/schools-dont-operate-in-a-vacuum-so-why-inspect-them-as-if-they-do-33693">that was overdue</a> in a system in which they play such a central role. </p>
<h2>Too much, too soon?</h2>
<p>All this is happening at a time when the overall evidence on whether academies have an overall positive effect on standards is mixed. The first generation of academies, the so-called “sponsored” academies set up in disadvantaged, primarily inner-city areas to take over from struggling schools, have shown <a href="https://theconversation.com/first-wave-of-academy-schools-created-under-labour-boosted-grades-39665">positive effects</a> on attainment. The picture <a href="http://www.nfer.ac.uk/publications/IMPB02/IMPB02.pdf">is less clear</a> for the more recent “converter” academies, successful schools that could convert to academy status. </p>
<p>Full academisation of English schools also marks the end of the National Curriculum, a flagship policy of a previous Conservative government, as academies can set their own. In practise, however, the exam and accountability system – including performance measures such as the <a href="https://www.gov.uk/government/publications/english-baccalaureate-ebacc">English Baccalaureate</a> – leaves government with a strong lever to direct what schools teach.</p>
<p>Osborne also announced additional funding for a quarter of secondary schools to extend their school day. This can be a useful strategy to improve attainment in particular for disadvantaged students. But as with academisation, the evidence is mixed: it is what schools do with the extra time that really counts. In particular, activities <a href="https://educationendowmentfoundation.org.uk/evidence/teaching-learning-toolkit/extending-school-time/;%20http://eric.ed.gov/?id=ED461695">need to be academically focused</a>, but sufficiently attractive to make sure students actually attend them.</p>
<h2>Closing the gap</h2>
<p>The schools inspectorate Ofsted recently <a href="https://www.gov.uk/government/speeches/a-nation-divided">identified a gap in school standards</a> between the north and south of England, with the former under-performing. In response to this, the government announced a strategy, partly copied from the successful <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/184093/DFE-RR215.pdf">London Challenge</a>, to improve them. The model is based on outstanding schools and leaders supporting their less successful neighbours. </p>
<p>There is evidence that this strategy can be successful, but <a href="http://www.tandfonline.com/doi/full/10.1080/09243453.2013.840319#abstract">it doesn’t work in all cases</a>. Some critics have claimed that the success of the London Challenge was not down to the strategy at all, but to changes in demographics, such as the <a href="https://theconversation.com/hard-evidence-why-do-students-in-london-do-better-at-school-34090">growing number</a> of non-white British working class pupils. Others have pointed to the additional funding received for each pupil by London schools. </p>
<h2>Teacher training revamp</h2>
<p>The white paper proposes to further increase the proportion of teacher training offered by schools rather than universities. The “best” universities will still offer teacher training, often in “centres of excellence” based on their “world-leading research and subject expertise”. This suggests that difficult times may be coming for those universities that provide teacher training that does not fit the criteria. </p>
<p>Schools are also to be given an increased role in accrediting new teachers. <a href="https://www.gov.uk/guidance/qualified-teacher-status-qts">The current system</a> will be scrapped and replaced by “accreditation based on a teacher’s effectiveness in the classroom, as judged by great schools”. Headteachers will play a key role. </p>
<p>The existing school-led teacher training system has come in for a <a href="http://www.theguardian.com/higher-education-network/2015/jan/19/school-direct-is-choking-university-teacher-training-courses">lot of criticism</a>, but in reality there is no real evidence of its effectiveness or otherwise. In part, this is because the impact of teacher training on student outcomes <a href="http://www.sciencedirect.com/science/article/pii/S0047272710001696">is hard to measure</a>. Still, the government’s emphasis on improving teachers’ subject knowledge and ensuring the content of their initial training is based on evidence is welcome, and will hopefully debunk some of the myths and poor practices that <a href="http://swcarpentry.github.io/instructor-training/papers/de-bruyckere-urban-myths-2015.pdf">still crop up in education</a>. </p>
<h2>Fairer funding</h2>
<p>The final major reform that will have a large impact in many schools is the change to the school funding formula. The government has set aside £500m to ensure that 90% of schools are funded under the new “fair funding” formula by 2020 to <a href="https://theconversation.com/the-way-schools-are-funded-in-england-is-ripe-for-reform-heres-why-55909">eliminate current discrepancies</a> in per pupil funding around the country. </p>
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<p>The new formula simplifies funding by using four levers: a basic amount per pupil, a payment based on additional needs such as low prior attainment, school costs (the extra costs for serving rural communities), and area costs (more funding will go to areas with higher costs). </p>
<p>This is likely to decrease some of the differences in funding between schools in different areas. What is fair is of course in the eye of the beholder and those schools and areas losing out under the new formula will no doubt quickly point out any inequities the new system may contain.</p><img src="https://counter.theconversation.com/content/56383/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Daniel Muijs does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Unpacked: academy ramp-up, new teacher qualifications and school funding formula.Daniel Muijs, Director of Research and Deputy Head of Southampton Education School, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/564522016-03-18T10:03:57Z2016-03-18T10:03:57ZCorporation tax: the progressive case for getting rid of it<p>George Osborne, the UK chancellor, announced that corporation tax <a href="https://www.gov.uk/government/news/budget-2016-some-of-the-things-weve-announced">will be cut to 17% in 2020</a>. But why stop there? There’s a very good case for thinking the unthinkable and getting rid of corporation tax altogether. </p>
<p>For one thing, corporation tax does not bring in huge tax receipts. Last year the onshore component <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/501040/Jan16_Receipts_NS_Bulletin_Final.pdf">brought in</a> 8% of all UK tax. And this is a gross figure, which excludes the <a href="https://www.gov.uk/tax-on-dividends/how-dividends-are-taxed">tax credits</a> that taxpayers receive on dividends (to be replaced in April by a <a href="https://www.gov.uk/government/publications/dividend-allowance-factsheet/dividend-allowance-factsheet">tax-free allowance</a>). By my reckoning, the true contribution that corporation tax makes to the tax take is more like 6%. </p>
<p>Corporation tax <a href="https://data.oecd.org/tax/tax-on-corporate-profits.htm">has been</a> raising less and less money worldwide in recent years because governments have been competing with one another to reduce rates. Having peaked at 13% of global GDP in 2006, it was down to 7% by 2014. There’s every reason to assume that this trend will continue, particularly as multinationals become better at avoiding tax liabilities in any one country. Why fight this race to the bottom?</p>
<p>But there’s another important argument for why corporation tax matters less than you think: get rid of it and the money would still reach the government in other ways. Suppose a company with 100m shareholders has decided to distribute all its after-tax profit of £50m to its shareholders - a dividend of £0.50 a share would be paid. That means that a shareholder with 10,000 shares would receive a £5,000 dividend. Assuming this was their only dividend income that year, they would pay no tax on it because of the <a href="https://www.gov.uk/government/publications/dividend-allowance-factsheet/dividend-allowance-factsheet">£5,000 dividend allowance</a>. </p>
<p>Now consider what would happen if there was no corporation tax and no dividend allowance. The person receiving the dividend would be taxed on it as if it were any other income. Instead of the tax liability disappearing, it simply shifts from company to individual. Assuming they were a basic-rate taxpayer being taxed at 20%, this would mean that the company would have to pay them a dividend of £6,250 for them to receive £5,000. It makes you realise that under the current system, corporation tax is effectively a pre-paid income tax. </p>
<h2>FAQs</h2>
<p>Yet if you were going to shift the tax liability to the person receiving the dividend in this way, you might have spotted an issue. Most companies do not distribute all of their profits to shareholders. UK companies pay out about <a href="http://www.telegraph.co.uk/finance/personalfinance/investing/12006273/The-chart-that-shows-UK-dividends-are-reaching-breaking-point.html">50%</a> of profits as dividends. And some, such as Ryanair, don’t pay dividends at all. So would HMRC lose out?</p>
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<a href="https://images.theconversation.com/files/115501/original/image-20160317-30231-1std34g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/115501/original/image-20160317-30231-1std34g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/115501/original/image-20160317-30231-1std34g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=932&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115501/original/image-20160317-30231-1std34g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=932&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115501/original/image-20160317-30231-1std34g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=932&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115501/original/image-20160317-30231-1std34g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1172&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115501/original/image-20160317-30231-1std34g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1172&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115501/original/image-20160317-30231-1std34g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1172&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Going up?</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/cat.mhtml?lang=en&language=en&ref_site=photo&search_source=search_form&version=llv1&anyorall=all&safesearch=1&use_local_boost=1&autocomplete_id=&searchterm=share%20chart&show_color_wheel=1&orient=&commercial_ok=&media_type=images&search_cat=&searchtermx=&photographer_name=&people_gender=&people_age=&people_ethnicity=&people_number=&color=&page=1&inline=391272478">Mclek</a></span>
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</figure>
<p>The answer is no. Get rid of corporation-tax liability and the share prices of companies would rise to reflect their extra net worth. The lower the dividend payout, the higher the share price. When shareholders sell their shares, this means they will make a higher capital gain, which means greater income-tax receipts for HMRC.</p>
<p>You might be wondering whether in a system like this, people would be more likely to invest in something other than shares and that the tax receipts would therefore be lost. I suspect companies would still look like a good investment overall, particularly because they would have become worth more and investors value the protection afforded by limited liability.</p>
<p>There is still the problem that governments want their money sooner rather than later since they have to fund public expenditure. Relying on tax receipts from dividend/share-sale income would potentially be slower than getting them from corporation tax. You could get around this by levying a withholding tax of say 20% on companies when they pay dividends – meaning the dividend income would be paid net of the withholding tax, which the company would be responsible for paying to HMRC – in a similar way to how VAT works. And levying a withholding tax, say 2%, when a shareholder sells shares.</p>
<p>You would then have to adjust the individual’s tax liability to take account of these withholding taxes. This would encourage taxpayers to declare all their income and complete tax returns, since they may be entitled to a tax refund. If you wanted to encourage them further, you could set the withholding tax at a higher rate – say 40% for dividends. </p>
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<a href="https://images.theconversation.com/files/115502/original/image-20160317-30244-8n85tq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/115502/original/image-20160317-30244-8n85tq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115502/original/image-20160317-30244-8n85tq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=424&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115502/original/image-20160317-30244-8n85tq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=424&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115502/original/image-20160317-30244-8n85tq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=424&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115502/original/image-20160317-30244-8n85tq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=533&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115502/original/image-20160317-30244-8n85tq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=533&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115502/original/image-20160317-30244-8n85tq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=533&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">‘One for you, 19 for me.’</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/cat.mhtml?lang=en&language=en&ref_site=photo&search_source=search_form&version=llv1&anyorall=all&safesearch=1&use_local_boost=1&autocomplete_id=&search_tracking_id=adhRP5br16s7ZkObDspxjQ&searchterm=tax%20liability&show_color_wheel=1&orient=&commercial_ok=&media_type=images&search_cat=&searchtermx=&photographer_name=&people_gender=&people_age=&people_ethnicity=&people_number=&color=&page=1&inline=389062894">Ho Yeow Hui</a></span>
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</figure>
<p>Yes this system brings its own complexities, but they are not insurmountable. There is no perfect tax system. And shifting the corporation-tax burden to the individual would have other benefits. HMRC would transfer resources devoted to corporation tax to income taxes, which should bring in more tax receipts. Many people, including Labour leader <a href="http://labourlist.org/2015/07/you-just-cannot-cut-your-way-to-prosperity-jeremy-corbyn-outlines-plans-to-make-large-reductions-in-93bn-of-corporate-subsidies/">Jeremy Corbyn</a>, argue that a better-resourced tax authority would benefit in this way. </p>
<p>Companies would save money since they wouldn’t have to pay their accountants to deal with corporation tax. Needless to say it would create a more business-friendly environment, which would make the UK a more attractive place for companies to invest – and I say all this as a believer in public services and progressive taxation. Once you recognise that doing away with corporation tax doesn’t mean losing tax revenues, these benefits hopefully become more persuasive.</p><img src="https://counter.theconversation.com/content/56452/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grahame Steven does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Why stop at 17%?Grahame Steven, Lecturer in Accounting, Edinburgh Napier UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/563872016-03-17T10:57:08Z2016-03-17T10:57:08ZAn obituary: farewell to your Local Education Authority<figure><img src="https://images.theconversation.com/files/115358/original/image-20160316-30231-fric7u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Where to from here?</span> <span class="attribution"><span class="source">Monkey Business Images/www.shutterstock.com</span></span></figcaption></figure><p>By announcing that all schools will be <a href="http://www.bbc.co.uk/news/education-35815023">expected to become academies</a>, George Osborne has foretold the death of local authority involvement in education.</p>
<p>Born on December 18 1902, Local Education Authorities (LEAs) will likely have their life support switched off sometime in 2022, by which time all schools will be expected to be on course to becoming academies. The local authorities will leave behind a number of precious local services, their future somewhat uncertain.</p>
<p>Despite their long life, LEAs have not been universally popular, making a number of enemies: the late <a href="http://www.theguardian.com/local-government-network/2013/apr/09/local-government-margaret-thatcher-war-politics">Margaret Thatcher</a> and former education secretary Keith Joseph, to name but two. Between them they <a href="http://hansard.millbanksystems.com/commons/1984/apr/05/inner-london-education-authority">killed off the Inner LEA</a>, but the behemoth that was the remainder of the local education authorities remained. </p>
<p>The death of local education authorities then seemed inevitable after they lost many of their powers of control over schools with the 1988 Education Reform Act. For many years since, their role has largely been one of scrutiny and support, but for some this will be very badly missed. </p>
<p>This time, the Conservatives intend to deliver a fatal blow. But there are five ways that schools and children will lose out from the demise of local authority control of education. </p>
<h2>1. A local champion for vulnerable children</h2>
<p>Local authorities <a href="http://www.fulloflifekc.com/information-service/disability-law.php">must currently engage with parents</a> and schools to ensure that the right provision for every child is available locally. Ensuring the specific needs of every child are met is hugely complex and even <a href="http://www.bbc.co.uk/news/education-26439576">local authorities struggle to meet their responsibilities at times.</a> </p>
<p>As education is fragmented, there will be concerns over how parents will be able to negotiate the minefield that is school admissions, with each academy or trust being its own admissions body. </p>
<p>Legally, local authorities have the responsibility to provide a school place for every child. If every school is an academy, local authorities or councils will have no power to require schools to expand their intake or take on any child. Already, LEAs are warning that <a href="http://www.bbc.co.uk/news/education-35671570">finding school places for all is becoming “undeliverable”.</a></p>
<p><a href="http://www.lgo.org.uk/publications/fact-sheets/complaints-about-special-educational-needs/">Currently, parents can take a local authority to a tribunal</a> if they feel the needs of their child are not being met. It’s unclear how this will work if the local authority in effect ceases to exist. </p>
<h2>2. A local vision for schools</h2>
<p>With the demise of LEAs, many schools will be run by multi-academy trusts (MATs) – chains of academies run by the same sponsors. Many trusts operate a number of schools, sometimes in different local authority areas. Some may know more about the local community than others. </p>
<p>The only answer the Department for Education has for under-performing academies or trusts is <a href="http://schoolsweek.co.uk/academies-swap-trusts-in-emerging-transfer-market/">the transfer of schools from one trust to another</a>. This is likely to increase, alongside the incorporation of standalone academies into existing and new trusts. </p>
<p>The governance of academy chains has been questioned, most recently by the current head of schools inspectorate Ofsted, Michael Wilshaw, who <a href="http://www.bbc.co.uk/news/education-35775458">highlighted several underperforming MATs</a>. </p>
<p>Ultimately, it is likely to be the vision of the trust, not the community, that schools will adopt – and parents will have to live with it.</p>
<h2>3. Local forum for school improvement</h2>
<p>School improvement arises from the efforts of people, not structures. A structural change will not deliver long-term sustained improvement in itself. </p>
<p><a href="http://www.local.gov.uk/documents/10180/11463/L13-718+CfPs+LGA+Education+v5.pdf/14435b0b-65cf-4699-9c84-e52083357a07">Local authorities have provided a platform</a> for a range of collaborations between heads, teachers, various schools and local and national services. Admittedly, some authorities are better at this than others, but the setting up of a free market competitive model for school governance where academy trusts actively compete rather than collaborate cannot be a good model for mutual improvement.</p>
<h2>4. Loss of essential services to schools</h2>
<p>Local authorities provide many services to schools, from the vetting of contracts and human resources management, to payroll services and delivering expertise in commissioning, tendering and procurement. They also provide many support services from school transport and peripatetic music teachers, to anti-bullying advice and educational psychology services. </p>
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<img alt="" src="https://images.theconversation.com/files/115363/original/image-20160316-30203-1k0t9dq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115363/original/image-20160316-30203-1k0t9dq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115363/original/image-20160316-30203-1k0t9dq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115363/original/image-20160316-30203-1k0t9dq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115363/original/image-20160316-30203-1k0t9dq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115363/original/image-20160316-30203-1k0t9dq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115363/original/image-20160316-30203-1k0t9dq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Pens poised for new contracts.</span>
<span class="attribution"><span class="source">Smiltena/www.shutterstock.com</span></span>
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<p>With academies funded directly by central government, local authorities will lose much of their funding as a result of the push to academise. This may well put some of these services at risk or increase their cost. If they are large enough, some MATs may be able to replicate the cost savings of local authorities by clubbing together and contracting such services. But small rural schools who depend on services offered by the council may struggle to afford them.</p>
<h2>5. Learning from the past</h2>
<p>The Conservatives have learned from Labour’s failure in the 1960s to completely eradicate grammar schools. The process of ending selection was resisted by some, most notably Kent, and the law never changed to ban or force grammar schools to close – it just prevented the opening of new ones. </p>
<p>They also learned from their own failure in the 1980s and 90s to abolish local authorities and establish more independence for some schools under what was called the <a href="http://www.legislation.gov.uk/ukpga/1988/40/part/I/chapter/IV">grant maintained programme.</a> Following Labour’s landslide election victory in 1997, a new act was passed in 1998 that reversed the grant maintained status of schools. </p>
<p>Putting these laments for the demise of the LEA aside, the evidence that academies are the best model <a href="https://theconversation.com/why-arent-all-academy-chains-boosting-results-for-their-poorest-students-45132">for school improvement is severely lacking</a>, especially for the poorest students. Research suggests that underperforming schools actually <a href="http://www.localschoolsnetwork.org.uk/2016/03/forcing-schools-to-become-academies-will-mean-more-inadequate-schools-and-worse-results">improve much faster under local authority supervision.</a></p>
<p>What the future holds for local authorities and education is extremely uncertain. The devil will be in the detail of the government’s planned legislation.</p><img src="https://counter.theconversation.com/content/56387/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>James Williams does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Five ways children will lose out by forcing all schools to become academies.James Williams, Lecturer in Science Education, Sussex School of Education and Social Work, University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/563792016-03-16T18:12:20Z2016-03-16T18:12:20ZBudget 2016: why growth isn’t Osborne’s biggest concern right now<p>Every budget is framed by political considerations, but they are particularly important in this one. Normally, a budget in the first year of a five-year parliament would be the time to announce tough but necessary measures. These considerations, however, are dwarfed by the massively important <a href="https://theconversation.com/uk/topics/eu-referendum">referendum</a> on the UK’s membership of the EU. </p>
<p>If the decision is to remain, then George Osborne’s future should be relatively bright, and he will be a strong candidate to succeed David Cameron. But a leave verdict would be a detriment to his leadership prospects. The Brexit vote will to some extent be a vote of the public’s confidence in the government. </p>
<p>So the chancellor’s strategy in this budget has been to avoid doing anything that will antagonise anybody, attempting to create an impression of quietly assured competence – that the government’s economic policy is succeeding – but also that we need to give them more time to realise the fruits of their policies. Osborne played up the threats of the external environment and sluggish global growth in particular – so he can blame them when the economy is under-performing, all the while assuring us that we need to stick to the course he has outlined. </p>
<h2>Economic growth</h2>
<p>It is true both that the UK economy is performing reasonably well, but that the chancellor is failing to meet some of his targets, particularly for deficit reduction. The UK’s rate of economic growth is <a href="http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf">expected to be 2% or slightly higher</a> over the next few years, which compares favourably with other advanced economies. The rate of inflation is <a href="http://uk.reuters.com/article/uk-britain-inflation-idUKKCN0UX0YU">extremely low</a>, employment is at a <a href="http://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/timeseries/lf24">record high</a>, and <a href="http://www.theguardian.com/business/2016/feb/15/uk-living-standards-return-to-pre-financial-crash-levels">living standards are rising</a>, albeit slowly.</p>
<p>Nevertheless, there are threats, partly from the world economy, but also uncertainty about the outcome of the EU referendum, which might be expected to reduce business spending. And the UK’s <a href="https://theconversation.com/how-strengthening-the-bargaining-power-of-workers-could-boost-uk-productivity-54921">low level of productivity growth</a> seems likely to persist. At the international level, Chinese economic growth <a href="https://theconversation.com/explainer-whats-going-on-with-chinas-economy-53404">is falling</a>, growth in the eurozone <a href="https://theconversation.com/explainer-what-is-the-ecb-bazooka-and-will-it-spur-a-eurozone-recovery-56302">is minimal</a>, there are major uncertainties <a href="http://www.theguardian.com/business/2016/feb/24/concerns-grow-us-economy-amid-service-sector-slowdown">about the US</a>, and some other important economies, such as <a href="http://www.npr.org/sections/parallels/2016/03/14/470116613/as-the-olympics-loom-brazil-lurches-from-one-crisis-to-the-next">Brazil</a> and <a href="http://www.bloomberg.com/news/articles/2016-01-28/russia-s-economy-faces-long-term-decline">Russia</a>, are contracting. But the chancellor’s reaction is not to attempt to stimulate economic growth through fiscal expansion. Instead, he seems to use it as a reason to persist with his longer-term plans. </p>
<p>The budget does contain a <a href="https://theconversation.com/budget-2016-experts-respond-56305">number of measures</a> to enhance long-term growth. He is increasing infrastructure expenditure and there is reform of education spending. On the tax side, there are reductions in business rates and corporation tax. </p>
<p>Although his plans to balance the budget have slipped, Osborne still projects a budget surplus of £10.4 billion by 2019-20. This involves quite a large change from the OBR’s <a href="http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf">projected deficit of £21.4 billion in 2018-19</a>. How that will be achieved in what promises to be an election year is not at all clear. It seems to be a case of delaying the pain. But in any case it seems clear that government debt will be falling as a percentage of GDP henceforth, so the deficit problem has been largely solved. </p>
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<h2>Bland budget</h2>
<p>There is nothing in the budget that should prove massively controversial (although there is much that seems complicated); pension reform has been shelved. There are a number of measures that should prove popular with large swathes of the electorate, such as a number of measures to tackle tax avoidance and evasion and the (unexpected) introduction of a <a href="http://www.bbc.co.uk/news/uk-politics-35813973">tax on sugar</a> in fizzy drinks. </p>
<p>It is difficult to see how these measures will contribute to enhancing growth in the near future, except perhaps by their effects on confidence. So the economy remains vulnerable in the short term. It is not clear what will happen if there is a vote for Brexit – and the chancellor emphasised that the OBR forecasts he was quoting were contingent on the UK remaining in the EU. </p>
<p>As far as longer term growth is concerned, the effects of increased infrastructure and education spending on growth and productivity might take well over a decade (or two) to be realised. It is difficult to see that the budget will do much for growth over the more medium term (the next five years). But that was not its main point. </p>
<p>We will have to wait at least until after the referendum on June 23 to assess whether the budget was a success in meeting Osborne’s prime political objective. As far as measures that might affect growth in the more medium term are concerned, we will have to wait, perhaps until the autumn, when we can expect a rather different set of measures in the chancellor’s next financial statement, some of which may be painful.</p><img src="https://counter.theconversation.com/content/56379/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Fender does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The chancellor’s strategy has been to create an impression of quietly assured competence. The result? Rather bland, but the surprise sugary drinks tax will go down well with the public.John Fender, Professor of Macroeconomics, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/564042016-03-16T18:00:13Z2016-03-16T18:00:13ZBudget 2016: an appeal to remain in the EU<p>Twelve minutes into his “big statement” budget, Chancellor George Osborne made a strong plea for the British public to vote to remain in the European Union in the June referendum.</p>
<p>Citing the <a href="http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf">Office for Budget Responsibility</a>, he argued that voting to leave would result in “disruptive uncertainty”. It would affect interest rates, the exchange rate, and possibly international investment decisions.</p>
<p>In fact, the OBR report is less robustly certain of the outcome of a potential Brexit vote than the chancellor suggested in his speech. It notes that the evidence is scant, and that any effects would take time to be felt, and would depend on the subsequent negotiation process.</p>
<p>There is certainly more rhetoric than hard fact in much of the business case for membership to date. However, the OBR’s assessment of the available evidence confirms that markets do not like the state of uncertainty surrounding Britain’s position on the EU.</p>
<h2>Mood music</h2>
<p>The chancellor’s eighth budget was squarely aimed at lifting business confidence and creating a more positive discourse about the state of the economy than we have heard from him over the past few months.</p>
<p>The purpose of this shift is not only to convince voters that the government’s plan is working, but also to help create the underlying mood music for a “remain” vote in June. Existing <a href="http://www.pewglobal.org/2015/06/02/faith-in-european-project-reviving/">polling evidence</a> suggests attitudes to European integration become more positive when voters feel the economy is doing well: optimism will win the day.</p>
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<p>The emphasis on small businesses is also significant. They have emerged as more sceptical of the benefits of membership than large multinationals. The BBC has recently <a href="http://www.bbc.co.uk/news/uk-politics-32793642">picked up on disquiet</a> among small businesses, which previous <a href="http://www.bbc.co.uk/news/business-34270117">Chambers of Commerce and other reports</a> have been signalling for some time.</p>
<p>However, aside from the general mood music, the government’s commitment to EU membership has something of a hollow ring to it – and the same was true of the budget. </p>
<p>Osborne did not just refer to his engagement in favour of membership, but his commitment to a “reformed” EU. This discourse of reform begs the question of how the government is going to reform the EU, when the consensus around the <a href="https://theconversation.com/four-key-parts-of-britains-new-deal-with-europe-explained-by-an-expert-in-eu-law-54124">February negotiations</a> is that the prime minister was unable to make fundamental changes.</p>
<p>And it was particularly striking how little the EU seemed to matter to the government’s economic policy in this budget. The chancellor was happy to namecheck the <a href="http://www.oecd.org/">OECD</a> when he talked about clamping down on tax avoidance, but why not refer to the EU’s <a href="https://theconversation.com/google-and-europe-come-to-blows-but-will-they-break-up-34989">attempts</a> to bring the multinationals to account?</p>
<p>The Conservatives have long sought to emphasise Britain’s strength as a go-it-alone economy. It featured heavily in the party’s pre-election manifesto and in most budgets before now. It would have been hard for Osborne to drop this narrative completely, but it seems more at odds than ever with a political commitment to EU membership.</p><img src="https://counter.theconversation.com/content/56404/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Susan Milner does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>George Osborne was eager to paint a rosy picture for potentially eurosceptic small businesses. But he could have gone further.Susan Milner, Reader in European Politics, University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/563942016-03-16T16:36:38Z2016-03-16T16:36:38ZFiery budget response from Corbyn – but what’s his alternative?<p>It is a difficult job for any opposition leader to respond to the government’s budget statement. Because of secrecy rules, the opposition is never entirely sure what will be in the budget. As the chancellor delivers his speech, the opposition benches get busy writing notes and delivering them to the front bench to help the leader of the opposition response. They focus on key issues or omissions made by the chancellor. </p>
<p>This year, in front of a packed House of Commons, Jeremy Corbyn rose to respond to his <a href="https://theconversation.com/budget-2016-experts-respond-56305">first budget</a> as opposition leader. He had clearly decided to focus on an issue close to his heart – inequality.</p>
<p>Instead of the reserved, slightly bland style it has come to expect from Corbyn, the house was treated to passion and conviction at the dispatch box.</p>
<p>Corbyn began by dismissing Osborne’s 2016 budget as a “culmination of six years of his failures”. He argued that the recovery, which Osborne had spoken about, was built on sand and based on social inequality. The poorest had been hit the hardest by austerity – something he argued was based on ideological choice rather than financial necessity.</p>
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<figcaption><span class="caption">Corbyn responds.</span></figcaption>
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<p>Keen to paint the Conservatives as toffs, he argued that the budget did nothing to stop “mates rates” tax options for big corporations. Meanwhile, investing in the HS3 trainline and the M62 motorway in Yorkshire and Lancashire could not disguise systematic under-investment in the north of England.</p>
<p>It should be noted that George Osborne looked slightly bewildered at this point, perhaps because Corbyn had suggested that 97% of those working on the Northern Powerhouse were based in London.</p>
<h2>Making his case</h2>
<p>For Corbyn, this was also an opportunity to pitch for new supporters. He argued that only the Labour Party could fight the gender pay gap, or deal with the tax rises and benefits cuts which hit the poorest in society.</p>
<p>He even argued that only Labour could harness the enthusiasm of young people to improve Britain’s productivity, inferring that British workers were being demotivated by the Cameron government and its actions.</p>
<p>There was support for the extra funding promised to fight homelessness and also improve flood defences, although Corbyn was keen to blame both issues on the Conservative government. Praise, too, for the planned sugar tax, with Corbyn paying particular deference to TV chef Jamie Oliver – a name drop many of us would have perhaps found a little unexpected on budget day.</p>
<p>Surprisingly little attention was paid to the decision to turn all schools into academies, particularly since this announcement was trailed ahead of Osborne’s speech. </p>
<p>Then it was back to his central theme. Corbyn argued that the government was “cruel and callous” and that cuts to disability benefits denied people of their dignity. The Conservatives, he said, were only interested in protecting vested interests, while Labour would oppose changes and campaign for a better situation for all.</p>
<p>As he sat down, how should Corbyn have felt? He should have been relieved that he survived such a difficult job and that he didn’t make any large or obvious errors. He could also be pleased that he had demonstrated a more aggressive style at the dispatch box, really hammering home his points. </p>
<p>Unfortunately, his performance will fail to convert many of the people he needs by his side, both within his own party and outside. While it was full of fire and conviction, it was not necessarily brimming with detail – or answers to the financial problems faced by the UK.</p><img src="https://counter.theconversation.com/content/56394/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Victoria Honeyman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Many predicted he’d crumble, but the Labour leader’s first budget was at least rousing.Victoria Honeyman, Lecturer in British Politics, University of LeedsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/563052016-03-16T15:08:29Z2016-03-16T15:08:29ZBudget 2016: experts respond<p><em>Chancellor George Osborne has delivered his eighth budget. Here our panellists give their take on what it means for the economy, business, healthcare and education. Stay tuned for further updates, and follow <a href="https://twitter.com/ConversationUK?lang=en-gb">@ConversationUK</a> on Twitter.</em></p>
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<h2>Economy</h2>
<p><strong>John Van Reenen, professor of economics, London School of Economics</strong></p>
<p>Four months is a long time in economics. When “Lucky George” delivered the <a href="https://theconversation.com/spending-review-2015-the-experts-respond-51063">Autumn Statement</a> he had enough fiscal good news to abandon plans to radically reduce tax credits to the low paid. </p>
<p>Unfortunately, the bad news has come thick and fast since then, causing a downgrade in the growth forecasts in today’s budget. For example, the 2016 forecast has been cut from 2.4% to 2.0%. But even worse than this was the Office for National Statistics’ discovery that GDP in cash terms was £18 billion – smaller it they had previously thought. This means fewer tax revenues are forecast to come in over the next five years.</p>
<p>The Chancellor made three fiscal pledges to cap welfare, reduce debt as a share of GDP and deliver a budget surplus by 2019-20. The first two promises are out of the window, so to avoid missing the third, he announced additional spending cuts of £3.5 billion. These are all pencilled in for the end of the parliament and Osborne is hoping that his luck will return, so they never have to be made.</p>
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<p>But austerity upon more austerity raises the question of whether there is an alternative to the medicine of more cuts. The answer is yes.</p>
<p>The pledge to have a 1% surplus by 2020 <a href="http://cep.lse.ac.uk/pubs/download/ea034_executive_summary.pdf">makes little economic sense</a>. It is calculated as tax receipts minus total public spending. And this is not just current spending on things such as ministers’ salaries, but also capital spending on infrastructure projects like High Speed 3 and <a href="http://crossrail2.co.uk/the-route/">Crossrail 2</a>. I strongly support these investments and the National Infrastructure Commission <a href="http://www.voxeu.org/article/lse-manifesto-growth">which has been pushing them</a>. </p>
<p>But why must such infrastructure projects be financed just by sales of public land and other government assets? The fiscal target should be on balancing the books on current spending over the business cycle – just as it was when the Office of Budget Responsibility was first set up in 2010. Otherwise there will always be too much pressure to under-fund public investment.</p>
<p><strong>John Maloney, associate professor of economics, University of Exeter</strong></p>
<p>The economy has turned down, only slightly, but the <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508193/HMT_Budget_2016_Web_Accessible.pdf">growth forecasts are down</a> for the next four years too, and that does make a difference. Downturns in the economy will mean tax receipts disappoint. In this situation a chancellor can do one of three things. He can cut spending or raise tax rates to put the deficit back on course. He can make the downturn itself his priority and cut taxes, or increase spending to get the economy moving again. Or he can shrug and do nothing. Roughly speaking Osborne cut at the beginning of the last parliament and shrugged at the end.</p>
<p>This time it looks as if it will be the other way round: 2019-20 is the year when a £20 billion deficit is now forecast to turn round into a £10 billion surplus. Until then there will be plenty of austerity for some – including the disabled – but this is far from an austerity budget. Given the Office of Budget Responsibility is now forecasting a lower national debt (though higher as a share of a smaller-then-expected national income) this isn’t a surprise.</p>
<hr>
<h2>Housing</h2>
<p><strong>Anya Ahmed, senior lecturer in social policy, University of Salford</strong></p>
<p>The budget reflects the Conservatives’ long term policy commitment to increasing owner-occupied housing. Young people were encouraged to save to buy their own home through the introduction of Lifetime ISAs, and more land was released for developments to sell to first-time buyers. </p>
<p>The chancellor also pledged £120m to tackle homelessness. The priority is to address rough sleeping, which has <a href="https://www.gov.uk/government/statistics/rough-sleeping-in-england-autumn-2014">doubled since 2010</a>. </p>
<p>But homelessness <a href="https://theconversation.com/who-are-the-homeless-and-how-do-we-count-them-52061">extends beyond rough sleeping</a>. And long-term solutions like affordable rented housing – <a href="https://theconversation.com/heres-what-david-cameron-could-learn-from-a-history-of-social-housing-54127">historically provided</a> by local authorities or housing associations – are vital to addressing this issue. Yet on the matter of social housing, Osborne was largely silent – aside from a pledge to delay imposing the benefit cap on supported accommodation until next year. </p>
<hr>
<h2>Health</h2>
<p><strong>Andrew Street, professor of health economics, University of York</strong></p>
<p>The government is implementing sugar taxes on soft drinks as recommended by Public Health England in its October 2015 <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/470179/Sugar_reduction_The_evidence_for_action.pdf">report on Sugar Reduction</a>. </p>
<p>Consuming too much sugar causes tooth decay and leads to weight gain, increasing the risk of heart disease, type 2 diabetes, and stroke. Taxing soft drinks appears an effective preventive measure. Such taxes have been introduced in Brazil, France, Mexico and parts of the US and evidence suggests <a href="http://bmcpublichealth.biomedcentral.com/articles/10.1186/1471-2458-13-1072">they are effective</a> at reducing obesity, either through reduced consumption or switches to less sugary drinks. </p>
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<img alt="" src="https://images.theconversation.com/files/115317/original/image-20160316-30231-1awl5jq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115317/original/image-20160316-30231-1awl5jq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115317/original/image-20160316-30231-1awl5jq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115317/original/image-20160316-30231-1awl5jq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115317/original/image-20160316-30231-1awl5jq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=500&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115317/original/image-20160316-30231-1awl5jq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=500&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115317/original/image-20160316-30231-1awl5jq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=500&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Can’t beat the feeling – of a hefty levy on sugary drinks.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/soxfaninsd/15715685864/in/photolist-pWJZT7-a92YN1-pfyKiD-ML4ZA-eUSwB5-b4JSk6-9DGZry-mxWb6-cE7TYw-4nKQou-dKdkRh-E7Fmd-4JFo6P-FvLEc-chBff-E7FRA-E7GoP-FvL4b-FvKsS-FvL4t-n1LoV-5QjQL6-54LpC4-cqsbU-7Drauh-iT9Nfv-694YE7-8bv2ej-zLg1i-nSg9gx-bxRRcr-gEV186-2TCgob-d3cLdU-da8aNt-rzGcxF-cF75f-3WqjM-apQ8uY-DZ4Cx-apMqDt-6yPSEu-aWkxBe-6WycHB-oyj8Zv-qaM51e-rPQWKQ-p2dkz-s12sJM-BgdLH3">Ken</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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</figure>
<p>The sugar tax will be implemented in two years, allowing the industry time to reduce sugar content. There will be two tax bands, at 5g/100g and 8g/100g. Milk and pure fruit juices are exempt, as will be smaller producers. </p>
<p>The tax is expected to raise £520m a year. This money will be channelled to schools to support out-of-school sports activities. Surprisingly, there is little evidence that physical education classes have a detectable impact on weight among children, perhaps because <a href="http://www.sciencedirect.com/science/article/pii/S0167629615000296">these substitute alternative forms</a> of physical activity. But enabling children to do physical exercise is a good thing in itself, irrespective of the effect it might have on weight. </p>
<hr>
<h2>Infrastructure</h2>
<p><strong>Geraint Johnes, professor of economics, Lancaster University</strong></p>
<p>The Chancellor’s announcements on transport infrastructure in the north come after the publication of <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/507650/rep-NIC_full_report_-_final_11_03_16_-_STC__2_.pdf">a report</a> by the National Infrastructure Commission earlier in the week. The commission suggests that the productivity impact of improved rail links within the Northern Powerhouse could – on a cautious estimate – add some £189m a year to earnings across the UK. Improved road links and metropolitan transport within each of the constituent cities should add further to this gain.</p>
<p>His reference to the forthcoming Crossrail 2 also follows <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/506633/Transport_for_a_world_city_-_100316.pdf">another report</a> from the NIC. A key consideration here is to provide transport infrastructure for areas where housing for the rapidly expanding capital will be developed. This will have substantial knock-on effects for the construction industry, and increase the capacity of London to grow.</p>
<p>Many of the measures announced in the budget have been heralded previously, but the renewed commitment to the <a href="https://theconversation.com/the-northern-powerhouse-what-actually-is-it-50927">Northern Powerhouse</a> is particularly welcome. It is critical, though, that the Chancellor releases funding for the electrification programme, for HS3, and for further road improvements quickly. </p>
<p>He can do this because the government can borrow for investment at historically low rates of interest. He should do it because the fragile state of the global economy calls on government to respond by providing a stimulus through responsible investment. The Northern Powerhouse has captured imaginations, but now people are impatient to see the dream become reality.</p>
<hr>
<h2>Business</h2>
<p><strong>Stephen Roper, professor of enterprise, University of Warwick</strong></p>
<p>Against a backdrop of continuing austerity at home and political and economic uncertainty across Europe, Osborne announced significant measures to reduce costs for the UK’s smallest firms. Changes to the small business rate relief will mean around 600,000 of the UK’s smallest businesses will pay no business rates in the future and increases in higher rate bands will reduce rates for around one in six of all UK businesses with employees. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/115310/original/image-20160316-30244-14zvuvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/115310/original/image-20160316-30244-14zvuvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/115310/original/image-20160316-30244-14zvuvg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/115310/original/image-20160316-30244-14zvuvg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/115310/original/image-20160316-30244-14zvuvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=487&fit=crop&dpr=1 754w, https://images.theconversation.com/files/115310/original/image-20160316-30244-14zvuvg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=487&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/115310/original/image-20160316-30244-14zvuvg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=487&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Rates for small businesses, like barbers, have been snipped.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/vintagedept/5204313143/in/photolist-8VTsYX-p3ZD9V-jQA1mg-gXNPkV-ej4pVF-id7Mzv-cNFQ77-gqrSYV-bP8ZAz-4XBnRn-pB7V2G-8EW1hv-A5wYb-4Lny4T-a47d9F-CUJPC-9Ep1LY-qMW9Ck-68QrjZ-7qsn5M-dxzgE2-afoNhe-vkpXbS-9HJwye-6MBtbt-4XFD6Y-dEthJJ-pCDj5U-q6tRkB-4x6tGm-qo4kAN-8PcaHj-dBdnrN-QhH4-5HREDB-e7dd8u-6fqNuP-6TVwFn-r8jRqm-8oQFJL-zUDtk-7uE8mw-cgeLR9-6pUL9o-5XMuqg-m7M1Ep-2LjTKJ-5fY8ZU-BvEXZs-fKAEUx">Anne Wuyats</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>These changes make a welcome contribution to supporting micro-businesses across the UK’s high streets. Taking cost out of these micro firms is helpful. The key question for future growth is whether the savings are ploughed back into the businesses.</p>
<p>Other budget announcements will also be important for small firms in specific sectors. The freeze on fuel duty will be a relief to those firms operating in the logistics and transport sectors and firms in the hospitality sector will also welcome the freezing of duties on most types of alcoholic drinks.</p>
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<p><strong>Gavin Midgley, teaching fellow in accounting, University of Southampton</strong></p>
<p>In many aspects, the budget delivered by Osborne was full of ambition and the measures proposed on business taxes were no exception. The chancellor made it clear that to fund the giveaways for small businesses and individuals, additional revenues will need to be raised from big corporations.</p>
<p>To achieve this, there will be further cuts to Corporation Tax (to be decreased <a href="http://www.independent.co.uk/news/uk/politics/budget-2015-corporation-tax-just-got-cut-again-even-though-the-uk-already-has-the-lowest-rate-in-the-10375238.html">to 19% in 2017</a>, then as announced today, down to 17% in 2020). This will attract large companies to invest and operate in the UK. </p>
<p>A raft of measures that aim to reduce tax avoidance were also announced. Restricting the level of tax relief on interest payments due to borrowing is particularly welcome. At this stage it is difficult to judge how successful these measures will be, especially as the details on the level of cost to detect and enforce them is still unknown. But the publication of a Business Tax Roadmap is a definite step in the right direction as it signals a real commitment to dealing with these issues as well as offering guidance to those affected.</p>
<hr>
<h2>Savers</h2>
<p><strong>Alan Shipman, lecturer in economics, The Open University</strong></p>
<p>A new Help-to-Save scheme was <a href="http://www.moneysavingexpert.com/news/savings/2016/03/help-to-save-scheme-to-offer-1200-bonus-to-low-paid-savers">well-trailed before the budget</a>. Targeting low-earners, the prospect of doubling your money if you can save up to £600 over two years, and repeating the feat two years later, will undoubtedly appeal. </p>
<p>But many will struggle to save these amounts. <a href="http://cdn.budgetresponsibility.org.uk/March2016EFO.pdf">OBR forecasts</a> show average house price inflation staying above 5% in the next five years, and growth rates of personal disposable income halving from 2.9% in 2015 to just 1.5% in 2019 and 2020. This may coincide with end-of-term austerity as the government seeks to turn the projected £21.4 billion public-sector deficit in 2018-19 into a £10.4 billion surplus in 2019-20. </p>
<p>As it swells the savings of those who can make them and does nothing for those who can’t, the scheme won’t necessarily reduce inequality. And some households may pursue the saving subsidy by neglecting to pay down costlier debt – giving a bigger bonus to credit card and doorstep loan companies. </p>
<hr>
<h2>Pensions</h2>
<p><strong>Jonquil Lowe, lecturer in personal finance, The Open University</strong></p>
<p>When is a U-turn not a U-turn? Days before the budget, the Chancellor announced that plans to replace pensions with individual savings accounts (ISAs) had been axed. But what are in effect pension ISAs – now rebranded the Lifetime ISA – have jumped out of the budget hat. Available from April 2017 they are a new optional way for the under-40s to save. In effect, younger generations will decide whether traditional pension schemes carry on long-term or wither on the vine.</p>
<p>A major difference from the axed proposal is that lifetime ISAs can be used for buying a first home, not just retirement – <a href="http://www.kiwisaver.govt.nz/new/benefits/">similar to the New Zealand Kiwi-Saver scheme</a>. The new Lifetime ISA can be opened by anyone aged 18 to 40. On contributions up to £4,000 a year, the government will add a 25% bonus – the same tax relief a basic-rate taxpayer would get on pension contributions.</p>
<hr>
<h2>Fairness</h2>
<p><strong>Eoin Flaherty, lecturer in sociology, Queen’s University Belfast</strong></p>
<p>Compared to 2015, the changes set out in this year’s budget are more insidious and subtle in their execution. The most significant details, in terms of their implications for public welfare, are those related to the tax base.</p>
<p>Osborne has proposed a reduction in capital gains tax from 28% to 20%, a reduction of corporation tax to 17%, and a raising of the higher income tax threshold to £45,000. These are prime measures for raising inequality even further, by shifting the tax burden onto labour.</p>
<p>Lower corporation tax rates simply incentivise large multinationals to indulge in <a href="http://www.irishexaminer.com/business/uk-mps-grill-google-over-irish-based-tax-companies-381522.html">creative accounting</a>. This does little to help grow the economy, and the prospect of job creation resulting from this measure is very much open to question.</p>
<p>Meanwhile, lower capital gains rates will benefit those top earners who derive their income principally from “rentier” sources, such as financial trading and property.</p>
<p>Measures such as the sugar tax, although welcome for public health, will disproportionately affect the poor, who end up paying a greater proportion of their income on indirect taxes.</p>
<p>The announcement of lifetime ISAs for the under 40s is also worrying. With growth revised downward, and little offered in this budget to enhance the income security of workers already threatened with insecure contracts, low wages, and in-work poverty, the offer of ISAs without the prospect of real income growth is meaningless.</p>
<hr>
<h2>Education</h2>
<p><strong>Daniel Muijs, head of leadership, School Improvement and Effectiveness Research Centre, University of Southampton</strong> </p>
<p>The chancellor’s push to convert all schools to academies by 2020 is a continuation of a <a href="https://theconversation.com/conservative-victory-means-englands-school-system-will-look-like-few-others-in-the-world-41553">longstanding Conservative policy</a> to give schools more autonomy. </p>
<p>The aim is to have totally transformed the schools landscape by the time the next election comes along, finally taking local authorities out of running schools altogether. In the secondary sector, just under two thirds are <a href="http://www.bbc.co.uk/news/education-35815023">now academies</a> – 2,075 out of 3,381. The picture in primary is quite different, as only around 15% of primary schools are currently academies. Converting all of them will be a huge task, not least for the Department for Education in managing the process.</p>
<hr>
<h2>Scotland</h2>
<p><strong>David Eiser, research fellow in economics, Stirling University</strong></p>
<p>The introduction of a tax on sugary drinks, which will raise around £0.5 billion, will be welcomed by the health lobby. It seems likely that Scottish taxpayers may contribute a disproportionately high share of this new tax, <a href="https://www.gov.uk/government/collections/family-food-statistics">given higher consumption of sugary drinks</a>, but the Scottish government will receive only a population share of the UK-wide revenues (through <a href="http://www.telegraph.co.uk/news/uknews/scotland/1580787/How-the-Barnett-formula-works.html">the Barnett formula</a>). </p>
<p>Reductions in taxation of North Sea revenues were <a href="http://www.bbc.co.uk/news/uk-scotland-scotland-politics-35817176">cautiously welcomed</a> by the SNP, but were partly a political stunt by the chancellor, allowing him to make vitriolic statements about the pooling and sharing of risks. The OBR forecasts that the price of oil <a href="http://budgetresponsibility.org.uk/efo/economic-fiscal-outlook-march-2016/">will remain around US$40 per barrel</a> over the course of the parliament, with North Sea activity bringing very little revenue to the Treasury. As a result, the cuts cost the Treasury around £200m a year.</p>
<p>Changes to income tax include the much trailed increase to the personal allowance and the rise in the higher-rate threshold. Both are tax cuts and benefit higher earners more than lower earners. Of course by 2017, income tax will be devolved to the Scottish parliament. But while Holyrood could decide to reverse the increase in the higher-rate threshold, it will not have the power to reduce the increase in the personal allowance even if it wanted to.</p>
<p>The chancellor also announced cuts to business rates, particularly for smaller businesses, while at the same time devolving the revenues to local authorities. While this policy is applicable to England only, the next Scottish government is likely to face pressure to follow suit.</p><img src="https://counter.theconversation.com/content/56305/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Eiser receives funding from the Economic and Social Research Council and the Nuffield Foundation.</span></em></p><p class="fine-print"><em><span>John Van Reenen receives funding from the ESRC and ERC.</span></em></p><p class="fine-print"><em><span>Jonquil Lowe is a member of the Women's Budget Group.</span></em></p><p class="fine-print"><em><span>Stephen Roper is Director of the Enterprise Research Centre which is funded by the department of Business, Innovation and Skills, InnovateUK, the British Business Bank and ESRC.</span></em></p><p class="fine-print"><em><span>Alan Shipman, Andrew Street, Anya Ahmed, Daniel Muijs, Eoin Flaherty, Gavin Midgley, Geraint Johnes, and John Maloney do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Amid sluggish global growth and a stuttering UK economy, George Osborne delivers his eighth budget.Geraint Johnes, Professor of Economics, Lancaster UniversityAlan Shipman, Lecturer in Economics, The Open UniversityAndrew Street, Professor, Centre for Health Economics, University of YorkAnya Ahmed, Senior Lecturer in Social Policy, University of SalfordDaniel Muijs, Director of Research and Deputy Head of Southampton Education School, University of SouthamptonDavid Eiser, Research Fellow, Economics, University of StirlingEoin Flaherty, Lecturer in Sociology, Queen's University BelfastGavin Midgley, Teaching Fellow in Accounting, University of SouthamptonJohn Maloney, Associate Professor of Economics, University of ExeterJohn Van Reenen, Director, Centre for Economic Performance, London School of Economics and Political ScienceJonquil Lowe, Lecturer in Personal Finance, The Open UniversityStephen Roper, Professor of Enterprise and Director of the Enterprise Research Centre, Warwick Business School, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/562482016-03-16T09:13:39Z2016-03-16T09:13:39ZIs George Osborne really the Political Chancellor, or just a hard-core Tory?<p>Is it actually possible for anyone to pen a portrait of George Osborne without using the phrase “political Chancellor” at least once? Even those of us who start out determined not to fall into that trap end up doing so before long.</p>
<p>Equally hard to avoid, it seems, is the tendency to note that Osborne “doesn’t always get the politics right”. Typical examples include his decision to signal “an age of austerity” prior to the 2010 election, which helped to worry an electorate that until then looked like it might give the Conservatives an overall majority. Then, of course, came his <a href="http://news.bbc.co.uk/democracylive/hi/house_of_commons/newsid_9712000/9712855.stm">Ominshambles Budget</a> in 2012. His taxes on Cornish <a href="http://www.bbc.co.uk/news/uk-politics-18244171">pasties</a>, caravans and <a href="http://www.bbc.co.uk/news/business-17472829">grannies</a> were widely credited with helping Labour get back in the game – albeit temporarily. And let’s not forget his embarrassing <a href="http://www.theguardian.com/politics/2015/nov/25/george-osborne-taps-27bn-windfall-for-tax-credits-u-turn">U-turn</a> on tax credits in 2015.</p>
<p>After that comes an almost obligatory paragraph reminding us that the Chancellor nevertheless has an uncanny ability to bounce back from such setbacks. Those who write him off, we must be reminded, may be speaking too soon – particularly those who think he can’t take on Boris Johnson for the Tory leadership.</p>
<p>Clichés, of course, are clichés only because they contain a least a grain of truth. So, while it might be tempting to swim against the tide, and to insist that Osborne only ever thinks about the economy, always makes the right calls, and is bound one day to move next door, it would be silly. All the above applies, whether we like it or not.</p>
<p>But still, there may be more to be said, especially if we set aside our fascination with the micro and focus for a moment on the macro – and if we forget for the moment our obsession with his climbing, or failing to climb, to the top of Disraeli’s <a href="https://www.gov.uk/government/history/past-prime-ministers/benjamin-disraeli-the-earl-of-beaconsfield">greasy pole</a>.</p>
<p>What if instead we see Osborne as the servant of the party as much as its potential master – as an ideologue as much a member of what he apparently likes to refer to as “the guild”?</p>
<p>Seen in these terms, the Chancellor can only be regarded as a roaring success.</p>
<h2>Blue blooded</h2>
<p>His austerity rhetoric may have ensured that the Tories didn’t score an outright win in 2010 but the chances of them doing so were always vanishingly small.</p>
<p>What it did do was to prepare the ground for what remains one of his signal achievements – turning a recession brought on by a global financial crisis into a tale of Labour profligacy and incompetence.</p>
<p>It’s a tale so convincing that (admittedly with some help from Ed Miliband and Ed Balls) it was still believed by many swing voters five years later. They refused to vote for Labour even in the wake of Osborne missing almost <a href="http://www.thisismoney.co.uk/money/markets/article-3490485/Osborne-s-50bn-Budget-black-hole-Chancellor-looks-set-miss-borrowing-targets-five-years.html">every economic target</a> he had set for himself.</p>
<p>But Osborne didn’t stop there. He proceeded to prove, through a series of budgets and Autumn statements – at least to the satisfaction of sufficient numbers of voters – that the state really could survive on far less than was previously assumed possible.</p>
<p>At the same time, he cut both the eligibility for, and levels of, a whole series of state benefits. He has simultaneously saved a ton of money and utterly residualised “welfare”. Now, an increasing number of people see state support not as a vital safety net but as a sink into which we’ve no intention of pouring any more of our hard-earned cash than we’re absolutely forced to.</p>
<p>Yet Osborne has done this while, so far at least, providing sufficient (or at least sufficiently cosmetic) protection for those parts of the public realm which, however infuriating it might be for Conservative neoliberals, voters regard as non-negotiable. The most obvious examples here are the NHS and pensions. </p>
<p>Indeed, he’s been so careful to protect the latter that he’s turned it from a purely defensive measure into a devastatingly offensive electoral strategy. He has helped ensure that the proportion of over 65s prepared to vote Labour has plummeted – a particularly useful trick to pull off given how many of them, unlike their grandchildren, actually turn up at polling stations on election day.</p>
<p>He’s even managed to do that at the same time as helping to signal to the more middle-aged chattering classes, via measures such as supporting same-sex marriage, that the Tories aren’t necessarily the “nasty party” anymore. </p>
<p>The Chancellor, then, might not be the consummate politician, inevitably destined for the very top. But he has undoubtedly been the consummate Conservative, helping his party towards a hegemony which may only be partial but which, under the <a href="http://www.electoral-reform.org.uk/first-past-the-post">first-past-the-post</a> electoral system and with the opposition fast fragmenting, looks good for at least a decade to come.</p>
<p>The columnist Gaby Hinsliff <a href="http://www.progressonline.org.uk/2016/03/03/the-battle-against-irrelevance/">noted recently</a> that “the liberal left is basically learning how it felt to be a Conservative in the 1990s: marginalised, defensive, feeling the argument slip away from you”. If there’s one man the Tories should thank for that, apart perhaps from Jeremy Corbyn, it’s George Osborne.</p><img src="https://counter.theconversation.com/content/56248/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Bale does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A close look at Osborne’s tactics suggest he is not destined for the top, but remains a consummate Conservative.Tim Bale, Professor of Politics, Queen Mary University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/558882016-03-14T15:03:42Z2016-03-14T15:03:42ZThere’s more to pensions reform than making us work for longer<figure><img src="https://images.theconversation.com/files/114946/original/image-20160314-11285-1dkp9ej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">shutterstock.com</span></span></figcaption></figure><p>Talk of changing pensions connects with us at an emotional level – how secure do our futures look? And crucially, how much power do we have over this process? It is a tricky business for the Treasury, too, as its <a href="http://www.theguardian.com/money/2016/mar/04/george-osborne-backs-down-on-radical-pension-reform">recent retraction of the pensions review</a>, due to feature in the spring budget, shows. </p>
<p>A new savings plan for low-earners, hastily announced before the budget, reflects how the government needs to be more proactive about encouraging people to save for their retirement. But even on the government’s estimates, the scheme would only be taken up by <a href="http://www.bbc.co.uk/news/business-35799404">one in six of those eligible</a>. The way we work is at the heart of this issue.</p>
<p>Proposals floated by the chancellor in a <a href="https://www.gov.uk/government/consultations/strengthening-the-incentive-to-save-a-consultation-on-pensions-tax-relief">consultation paper</a> published last summer looked at reducing or scrapping tax relief on pensions. It was a surprisingly radical move for the government. The plan looked set to penalise higher tax payers, who benefit the most from the tax relief they receive on pension savings under the current system. At the same time, it would save the public purse up to £35 billion a year. </p>
<p>But less than a week after <a href="http://www.bbc.co.uk/news/business-35668372">discussion had turned to the reforms</a> and the upcoming budget, it began to ruffle a few too many feathers in the run-up to the EU referendum. Vocal among the critics of the mooted reforms were the <a href="http://www.theguardian.com/commentisfree/2016/mar/08/osborne-pension-u-turn-treasury">vested interests</a> of the pensions industry. </p>
<p>Major reform is urgently needed. We have never lived so long as we now do and <a href="https://www.gov.uk/government/news/life-expectancy-at-older-ages-is-the-highest-its-ever-been">Public Health England</a> recently announced that life expectancy has risen yet again. With baby boomers hitting retirement age, the pension age population is exploding once more. While we may be living longer, we are not necessarily reaching old age in good health. Quality of life is a <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/464275/gs-15-13-future-ageing-trends-life-expectancy-er12.pdf">growing concern</a>, with three-quarters of us likely to reach state pension age with compromised health. </p>
<p>Hence, while the state pension age edges steadily upwards, early or forced retirement is still the norm for the majority. The option of working longer is not equally open to all. Cries that <a href="http://www.ibtimes.co.uk/pensions-crisis-looms-young-brits-may-be-forced-work-into-their-70s-1546990">we will have to carry on working into our 70s</a> fail to recognise how impossible this is for many, and the transformation that is needed in the health of the nation to make it even remotely possible. In fact, calculating how we could work in later life – not necessarily full time, or in the same way that we work at other points in our lives – could be immensely valuable.</p>
<h2>New dynamics</h2>
<p>Just as we are ageing differently, we are also working (and indeed retiring) in very different ways from a century ago when the state pension was established for those aged <a href="http://ourworldindata.org/data/population-growth-vital-statistics/life-expectancy/">70 – and life expectancy was just 51</a>. Changes in the labour market in recent decades have been dramatic, and understanding these <a href="http://workfutures.southampton.ac.uk/files/2013/08/2016-NewDynamicsOfWork.pdf">new dynamics</a> will be key to supporting retirement transitions in the future. </p>
<p>We exist in a global economy, an ever-expanding part of our work is digitised, and economic crisis and demographic changes mean that work has become more fluid and unpredictable. With constant technological developments taking place, including robots <a href="http://www.theguardian.com/technology/2015/dec/03/robo-toys-mechanical-bears-future-carers-robots-japan">to care for an ageing population</a>, the ways in which we work is likely to carry on shifting. </p>
<p>Thus, policymakers must review outdated models of retirement based upon the professional male notion of an upwards career trajectory in a single workplace, and look beyond the statutory age of retirement. The breadwinner model is all but gone; few families can live off a single income and women now enter the labour market <a href="http://www.oecd.org/edu/ceri/41939699.pdf">at least as well qualified as men</a>. </p>
<p>Young people are increasingly expected to <a href="http://soc.sagepub.com/content/early/2015/09/18/0038038515574456.full.pdf?ijkey=zfuZzoFHX4FDIVW&keytype=finite">work as interns</a> in order to break into professions and the number of people on short, fixed-term or zero hours contracts is <a href="http://www.ons.gov.uk/news/news/justover800000peopleonzerohourscontractformainjob">on the rise</a>. For these people, employment protection is unreliable and pensions planning precarious. </p>
<p>Indeed, unpaid work goes on in different forms over the course of a lifetime, and often has an intimate connection to paid work. Key demands include taking time out to care for children and grandchildren, or ageing and ill loved ones. While necessary, this inevitably damages people’s ability to save for retirement. We need pensions schemes that reflect these working patterns, not those which shore up a cliff-edge retirement model. A sudden end to work, which most people experience and which often equates to a jump into the unknown, is more detrimental to health in later life than <a href="http://psycnet.apa.org/index.cfm?fa=search.displayrecord&uid=2009-18896-003">phased alternatives</a>. </p>
<p>The challenge is not so much how to keep the wealthy saving, but how to open up the possibility of saving to those focused on surviving in the new world of work. Osborne is understandably concerned about damaging trust among higher earners. But if we are truly to take a longer-term focus on retirement, and promote secure and well-planned transitions out of work among an ageing population, we need to look less at those whose futures are most assured and already saving, and more at people whose options are restricted from every angle and whose planning strategies are thwarted.</p><img src="https://counter.theconversation.com/content/55888/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jane Parry has received funding from research councils, research foundations and government departments to conduct research. She is a member of the Labour Party, British Sociological Association, and British Society of Gerontology.</span></em></p>Pensions reform is badly needed in the UK – but the realities of work in the 21st century are often ignored.Jane Parry, Lecturer in Gerontology, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.