Economic policy

Does the OBR run this country?

philmullan Democracy, Economic policy, Politics, State intervention , ,

The UK desperately needed something bold and innovative from this week’s spring budget. The nation’s infrastructure is literally crumbling, the energy grid is overloaded and local authorities are going bankrupt. The economy and public services are simply not working.

Of course, it would have been naive in the extreme to expect any answers to these problems from the current moribund Tory government – even as a General Election looms. And, given the UK’s stagnant economy, any chancellor would have struggled to conjure up the resources to fix all of this now in a single budget. Still, chancellor Jeremy Hunt’s budget was a paltry affair, even by his past standards.

Some have blamed the paucity of the chancellor’s budget statement on the Office for Budget Responsibility (OBR), the ‘independent’ watchdog that determines whether the chancellor is sticking to his so-called fiscal rules.

But we should be wary of demonising the messenger. And any suggestion of ‘external’ constraints on the government should be rebuffed, as it lets our elected leaders shirk responsibility for their own decisions.

Read the full article here.

The tax-cut delusion

philmullan Creative destruction, Economic growth, Economic policy, Politics

A second article suggesting a different approach to the UK’s 6 March spring Budget.

Many in and beyond the Tory Party seem to believe that lowering taxes is a cure to our economic ills. It’s time these tax-cut proponents stopped kidding themselves about the economic effects. A cut in personal or business taxes will not re-energise Britain’s entrepreneurial spirit or resolve its high-debt, low-growth malaise. The barriers holding back investment and innovation won’t be overcome with a reduction in income or corporation or inheritance tax. Britain’s economic slump is deep and protracted.

Yes, we can legitimately argue for lower taxes from the perspective of personal freedom. But lower taxes won’t raise productivity levels. That can only happen through the restructuring of our economy, by shifting resources away from low-productivity businesses into higher-productivity businesses that can provide better-paying jobs. That will require a wave of creative destruction, not fiddling with tax rates.

Read the full article here.

The tyranny of government-by-spreadsheet

philmullan Democracy, Economic policy, state

The budget statement used to be a government’s big opportunity to unveil its political programme and allot society’s resources accordingly. It was an annual moment of huge political significance. Yet, from the late 1980s onwards, it has become an increasingly managerial exercise, drained of any broader political vision. Today’s budgets represent a triumph of technocracy over democratic politics. In the run-up to this spring’s budget on 6 March both Jeremy Hunt and Rachel Reeves are continuing this practice of wanting to insulate economic policy from democracy. Surely we could re-politicise and re-democratise the pre-budget discussion.

Read the full article here.

Why industrial policy isn’t working

philmullan Creative destruction, Economic growth, Economic policy, Politics, State intervention

There can be good reasons for governments to pursue a so-called industrial policy – that is, a policy that sustains or develops certain industries in order to achieve national goals. In less developed countries, an industrial policy can help develop foundational industries, such as energy or food production. In developed countries, a government might pursue an industrial policy during wartime, providing financial assistance to armaments producers.

But in Britain today, there are several compelling reasons for not pursuing an industrial policy. Excessive corporate welfare is sucking the dynamism out of the UK economy. As things stand, government efforts to shape and direct industry are slowing growth, encouraging corporations to depend on state handouts and distracting from the core role of the state in providing decent public services and infrastructure.

Read the full article here.

The economic change we need won’t come from Labour

philmullan Creative destruction, Economic growth, Economic policy, Politics, State intervention

Following the UK Labour Party’s annual conference, which wrapped up last week, we now have a better idea of its economic plans. Though plenty could still change before the next General Election, it’s clear that Labour is not planning to offer an alternative to the existing Conservative economic programme. Essentially, what leader Keir Starmer and shadow chancellor Rachel Reeves are promising is the same old muddling through, but without the Tory ‘instability’ and ‘chaos’.

Indeed, in content, Labour’s policies are very similar to those already in operation. And since these policies have done much to keep Britain stuck in an economic depression, this portends a dismal financial future for most of the population. At the heart of the problem lies the quest for ‘economic stability’.

Read the full article here.

Phil Mullan will be speaking at the Battle of Ideas festival in London in the session, ‘Bouncing back or basket case? The state of the UK economy’, on Saturday 28th October.