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In Part One of Policy Exchange’s analysis of the Budget, Chief Economic Adviser Dr Graham Gudgin looks at the forecasts produced by the Office for Budget Responsibility. These official forecasts are the basis for spending decisions today and planning for the future – which means they must be robust. As we saw with the overly pessimistic Treasury forecasts regarding Brexit, they are not always right.
‘Without sound finance, you cannot have a strong economy with which to fund public services’ – the moral the Chancellor should choose for his Budget
Policy Exchange’s Research Fellow in Economics, Mike Taylor, sets out the guiding principles with which to judge the Autumn Budget. Highlighting the importance of fiscal sustainability, Mike cautions those seeking to use the Japanese experience to justify higher borrowing, pointing out the limits of any comparison with the UK.
A sensible deal on the Northern Ireland border is very achievable – Brussels and Dublin should stop playing games.
Policy Exchange’s Chief Economic Adviser, Dr Graham Gudgin, sets out how a workable deal on the Northern Ireland border could be delivered – without the return of a ‘hard border’. He says that the Irish Government and European Commission are using the issue for short-term political gain.
Today’s quarter point rise in interest rates by the Monetary Policy of the Bank of England is notable as the first increase in ten years. But at 0.5% Bank Rate is still at extremely low levels. Indeed today’s move merely reverses last August’s quarter point cut, which was an easing of policy designed to help offset the anticipated slowdown in growth following the EU referendum result. Given that by the end of last year it was clear that the economy was actually in fairly good shape it would have been prudent to have reversed this last rate reduction several months ago. But it is better late than never.
Warwick Lightfoot, Head of the Economics Unit, argues that the controversy over the introduction of Universal Credit is an opportunity to revisit the fundamentals of a modern, market-friendly benefit system. At present benefits extend too far up the income distribution, damaging incentives and productivity as benefit withdrawal pushes effective marginal tax rates to extreme levels. In addition, greater regional variation in benefits, to take account of local labour market conditions, would be a major improvement.
Warwick Lightfoot — Policy Exchange’s Research Director and Head of Economics and Social Policy — reflects on present monetary policy challenges, to mark the twentieth anniversary of the Bank of England becoming independent and the creation of its Monetary Policy Committee. Lightfoot argues that the necessary starting point is to recognise that ‘monetary policy was at the heart of the monetary shock in 2007’, and that ‘the policies that have been successful in stabilising the macro-economy have thrown up complex microeconomic problems that will make future policy difficult’.
German Chancellor Angela Merkel will face her fourth general election next Sunday, 24th September. Opinion polls strongly suggest that she will win a fourth term forming a coalition with one or more of f the other parties. Attention will then shift to the policy...
Policy Exchange Director of Research & Head of Economics and Social Policy, Warwick Lightfoot, assesses the prospects for fiscal policy to correct the divergences of incomes within the Eurozone. The scope and scale of policy – even with a Eurozone Ministry of Finance and fiscal transfers will not be sufficient to offset the forces of monetary policy pushing in the opposite direction. Structural reform of labour markets, not fiscal policy, is the best way to improve economic prospects throughout the Eurozone.
Policy Exchange Economics Research Fellow, Michael Taylor, assesses the performance of the UK economy in the year following the EU referendum. Contrary to many analysts’ forecasts the economy has held up well with growth close to its trend rate. Inflation and unemployment are both low by historical standards and public sector borrowing is finally under control. Sterling’s depreciation should soon see a recovery in exports. The economy is in pretty good shape as departure from the EU draws closer.
Policy Exchange Economics Research Fellow, Michael Taylor, analyses the implications of the forthcoming MIFID 2 European regulations for financial services. He argues that the effects will be far-reaching but on the whole should be positive. By comparison the impact of Brexit on financial services will be relatively modest.