IntroductionBrexit is the main reason the SNP give for wanting another referendum so soon after the last. While an independent Scotland as part of the EU would enjoy a larger single market than it enjoys as part of the UK, leaving the UK’s single market would impose short term costs almost certainly greater than the costs of Brexit. The government that enacted Brexit refuses to allow another independence referendum. A future Labour government might be less inclined to deny the Scottish people any say on independence, but that government could also start a process that would undo much of the harm caused by Brexit.With Conservatives in power independence involves short term pain and long term gainI cannot comment on the legal reasoning that lay behind the… [Read More...]

This week, things are not what they seem for our Britain columnist [Read More...]

This post is prompted by the discussion around the Autumn Statement, but also in particular a postby Ian Mulheirn. Here is the key diagram from his post. I think the diagram is useful because it distinguishes three aspects of aggregate fiscal policy that can easily become confused. However it is worth talking a bit about its limitations lest the diagram itself adds to confusion. Each of the three circles above represents a non-central point on a spectrum. Take the ‘support short term growth’ for example. At one extreme (near to my own position [1]) you can believe that in a recession, or before an expected recession, or during the recovery from a recession, the need to stimulate the economy should take absolute priority over all… [Read More...]

Our Britain columnist offers Theresa May a dramatic suggestion [Read More...]

This was not quite the Autumn Statement many people were expecting. Public spending on health and schools was increased a bit in the short term, welfare payments were indexed to inflation with some icing on top, and cuts to public spending were postponed to after the next election so may never happen. If we discount the latter, the fiscal tightening was all about raising taxes by not indexing allowances. By 2023/4, the ratio of taxes to GDP (national accounts definition) will be nearly 37’5%, compared to just over 33% in 2019/20. Of course none of that means that most public services are not still in crisis, or that the government’s assumptions about public sector pay are any less painful (and strike creating), or that higher food and energy… [Read More...]

Our Britain columnist has not lost all faith in his country’s parliament [Read More...]

The Monetary Policy Committee of the Bank of England (hereafter ‘the Bank’), by raising interest rates over the last six months, intends to play its part in creating a prolonged UK recession. This is not speculation but a statement of fact. The Bank’s latest forecast, similar to the one in August thatI highlighted in an earlier post, suggests negative growth in GDP in the third quarter of this year, forecasts a further fall in the fourth quarter, with further falls during the first half of next year. Why does the Bank think it needs to help create a prolonged recession? It is not because energy and food prices are giving us around 10% inflation, because a UK recession will do almost nothing to bring energy and food… [Read More...]

Our Britain columnist worries about the lack of talent in the foreground of British politics [Read More...]

Since Chancellor Hunt cancelled his predecessor’s cancelling of the rise in corporation tax and postponed indefinitely the cut in income taxes, but did not cancel the cancellation of the rise in national insurance contributions, there has been much talk of Austerity 2.0. I’m not sure I like the label Austerity 2.0 as a description of possible future public spending cuts. The label austerity for the cuts after 2010 made some sense to me because it was about cutting public spending at just the wrong time in the economic cycle. It ignored everything we learnt from The General Theory that is now embodied in state of the art macroeconomics. It didn’t just make users of public services worse off, but it made everyone worse off by reducing national income. Some of… [Read More...]