Tax and the Economy
As 2014 opens, the news from the Treasury seems upbeat. Growth is back. Economic forecasts are being revised upwards. The mood has switched from gloom to boom.
In After Osbrown: Mending Monetary Policy, Douglas Carswell MPfor Clacton, who previously worked in fund management, warns all is not what it seems. The warning signs are already there: this may yet prove to be another credit-induced recovery. The UK is increasingly dependent on consumer spending and mortgage debt. Savings and investment are down. The UK’s current account deficit is widening.
The Coalition’s welfare reforms aim to ensure that working people earn more than those on benefit and that unemployed people can find and keep a job. These are widely welcomed. But, says Frank Field MP, the Labour Member of Parliament for Birkenhead, more radical change is needed if the system is to be effective, affordable and also fair.
In Working Welfare: Contributory Benefits, the Moral Economy and the New Politics, Mr Field, a former minister for Welfare Reform and Chairman of Parliament’s Social Security Select Committee, says if welfare is to work, thecontributory insurance principle must be restored to the National Insurance System. Contributors and tax payers should own their individual ‘pots’ and new mutual societies should run the system on their behalf.
John McFall, Kent Matthews, Patrick Minford, David Green, Jamie Dannhauser, John Hodgson, Scott Cochrane, David B. Smith, Edward George
The financial crisis of 2007-8, its aftermath and the bank bailouts which followed have prompted an intense interest in the financial sector and its future regulation. Politicians have responded with a series of measures to regulate and prevent a recurrence. Banks will be obliged to have higher capital ratios; investment banking will be separated from retail and the presumption will be that in future there will be no bailouts.
The authors of Politeia’s new volume*, The Financial Sector and the UK Economy: The Danger of Over-Regulation,who include some of the country’s most distinguished economists and others with specialist knowledge of the financial services industry, are in no doubt that there are serious problems to be tackled. But they raise concerns about the emphasis, volume and efficacy of current measures, which may not bring the intended results or may prove counter effective.
Norbert Hoekstra, Ludger Schuknecht and Holger Zemanek
As the Coalition focuses its economic programme on growth, including plans to stimulate the housing market, should the government embark on another round of fiscal stimulus or is the solution of a different order? Politeia’s new study, Going for Growth: The best course for sustained economic recovery, by three senior economists at Germany’s Finance Ministry considers the evidence from six countries. Each has in recent decades emerged from similar problems of high public expenditure and stifled growth.
News of a 0.7% fall of UK GDP for the three months ending June have triggered fresh demands for a further ‘Keynesian stimulus’ and the injection of fresh public funds to stimulate the economy. But Politeia’s Realistic Recovery: Why Keynesian Solutions Will Not Work, explains that this would be the wrong course. The author, Professor Vito Tanzi, a former Fiscal Affairs Director at the IMF in Washington, shows why this is.