This week, The Daily Telegraph is running a series of opinion pieces from some of the country’s top economists with their prescription for the recovery. Although their proposals are quite different, they are united on one point. That the Government must do more to help the recovery. That courageous action is needed now.
“Action needs to be bolder,” says Andrew Sentance, a former Bank rate-setter and now senior economic adviser at PricewaterhouseCoopers.
It is a message echoed by Jonathan Portes, director of the National Institute of Economic and Social Research. “Things could and should be better, if policymakers would only act,” he says. At the Institute for Fiscal Studies, director Paul Johnson declares: “Governments just seem unwilling to take political risks.”
The series is a call to arms for the Chancellor. Each of the five economists has a radical proposal to deliver growth. For some, like Mr Portes and Lee Hopley, chief economist at the manufacturers’ organisation the EEF, it might mean borrowing a little more for temporary tax cuts or infrastructure spending.
For others, like Sentance and Danny Gabay, a former Bank of England economist and director of Fathom Consulting, it means striking bold new strategies without altering the deficit reduction plan. Johnson takes the longer view, calling for the sort of brave decisions that are needed to reinvigorate the country for the next generation as well.
For Sentance, the Chancellor needs to improve the competitiveness of the economy by “relieving burdens on business” and improving the transport infrastructure. A National Competitiveness Council could be created. Infrastructure investment, he says, should be achieved by reallocating spending from less high-growth areas, rather than taking on more debt. The tax system must also be simplified.
Portes also says the country could do with an infrastructure upgrade, particularly the housing stock.
“A temporary but large cut in National Insurance contributions for both employers and low-paid employees would boost labour and consumer demand,” he believes. Unlike Sentance, he thinks the Government could afford to borrow more from the markets to pay for the temporary giveaway, with no repercussions.
Gabay takes a different tack. The crisis is, and has always been, about private sector debt, not the public finances. Like Japan, which suffered a lost decade due to its over-indebted “zombie companies, the UK has zombie households and banks”, he says. “The only way to move forward from a debt overhang is to clear it.”
To clear the debt, he suggests using quantitative easing (QE) to buy cut-price mortgage debt and force house prices down. It would “hurt in the short term” but QE could be used to “cushion the pain”. Spending more on infrastructure would only repeat the mistakes Japan made.
Hopley wants businesses to come to the rescue by investing their cash hoard. Copying the US policy of 100pc tax-free capital allowances would bring forward investment and “put companies in a stronger position for growth in the medium term”.
Finally, Johnson calls for big changes that would restructure the economy. Planning regimes should be reformed to make it easier for “cities and regions to grow”.
Inefficient taxes should be cut. Debt and equity should be treated equally, and VAT extended to more goods. Most important of all, educational outcomes, as opposed to qualifications, should be improved with a more rigorous approach to teaching.
Only by being radical will the economy not only recover, but flourish.
0 komentar:
Posting Komentar