Dr John Glen (pictured), senior lecturer in economics at Cranfield University, said Mr Osborne would soon have no choice but to do so if he was to reach his objectives.
Addressing a packed audience of business executives in the wake of the Budget and the consequent controversy over personal independence payments for the disabled, he praised efforts to encourage economic growth by stimulating lending, the construction sector and consumer confidence.
Compared to other developed economies, the UK had produced “a really good performance”, Dr Glen said. But after both General Election wins Mr Osborne had been seen to “swallow the austerity pill big style”.
Speaking at an annual tax and economic update held at the Milton Keynes office of international accountancy firm Mazars, Dr Glen said: “To sort out the public finances is the right thing to do but he overstresses it. He does not manage the message properly and as a result frightens both consumers and investors.”
Highlighting how national debt continued to increase faster than the ability to pay for it via economic growth, Dr Glen said the Chancellor needed to “keep it simple” and focus reductions in public spending on major departments like health, education, defence and welfare where most of the money went.
Dr Glen added: “He is fiddling around the edges of taxation on things like personal independence payments when he should be making big decisions on tax and expenditure. It appears he does not want to face up to it but at some point he will have to.”
Mazars tax partner Lindsay Pentelow said Mr Osborne has created a new landscape weighted against the mid-market company, a decision he said was odd given that everyone says that it is this sector which is vital to creating employment and innovation.
Mr Pentelow added: “This is the result of a combination of pension provision being dismantled, a rise in dividend rates, a low capital gains tax rate which only benefits a sale, and the threat of recharacterisation of capital transactions as dividends through the Transactions in Securities rules.
“Among the questions this poses for the shareholder in the mid-market sector were: how can we realise value from our company if we cannot do it through pension provision, if dividend tax is higher and if we do not want to sell? What are needed are new strategies for partial equity release.”
Where shares historically would have passed from one generation to another by gift family MBO-type arrangements are worth exploring, he suggested.
Equally long term capital and corporate structures need to be adopted which have built in to them opportunities for equity release.