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Headroom, the few billion pounds by which the Chancellor is forecast to meet the fiscal rules, is the wrong target. It moves with forecast noise the Treasury barely controls, so chasing it makes tax and spending policy just as noisy. Set the rules once per parliament, stick to them unless there is a genuine crisis, and let voters judge the result at the end. On 28 October, the Chancellor will present his first Budget. The run-up has followed a familiar script. A new forecast arrives, the estimated "headroom" against the fiscal rules shrinks or grows by a few billion pounds, and taxes and spending are adjusted to match. For weeks, the debate about Britain's public finances comes down to a single number. That ritual is bad economics. Tax and spending decisions should aim for stability, for a tax system that makes the UK an attractive place to invest, and for long-term fiscal sustainability, not chase every change in the outlook. That requires fiscal rules set once, at the...

This blog article is the combination of a work that I did with my colleagues Amit Kara with some work that my other colleagues Rebecca Piggott and Arno Hantzsche did.It was first published in NIESR's blog and is reproduced here with permission. The UK government published a White Paper on 12th July outlining its preferences for a future relationship with the EU. In this blog we compare the proposals outlined in the White Paper against other EU free trade agreements (FTA) and also estimate the impact on the UK relative to our central forecast, published in August 2018, that assumes a soft Brexit. Our results suggest that the UK is looking for a trading relationship that is similar in scope to the arrangement between the EU and Switzerland. If that is indeed the case, we believe that the EU will insist that the UK make concessions on the freedom of movement of people and also ask for a budgetary contribution to EU programmes related to the single market. We estimate that the econo...

I first published this article on the National Institute of Economic and Social Research blog . It is reproduced here with permission. For the non-British readers, the title is a play of words in reference to a famous BBC TV series, the Great British Bake Off. The British Prime Minister and four of her senior cabinet colleagues will in a series of speeches over the next few days set out a vision for the UK after Brexit. Those speeches will likely reiterate the government’s official goal of ‘free and frictionless’ trade with the EU. Less clear are the concessions that the UK is prepared to make to achieve this objective. In this blog we explore the likely trade-offs from the prism of a simple schematic and focus on three key areas of negotiation - market access, labour movement and budgetary contribution. There is no magic formula and the decision is ultimately political. With that in mind, the PM and her colleagues should spell the priorities on each of these three dimensions in th...

A recent study showed that UK companies paid much more taxes that French or German companies. Tax paid on value-added: - 6% Germany - 8% France and Germany - 12% United Kingdom

From The Sunday Times January 6, 2008 David Smith, Economics Editor LIVING standards in Britain are set to rise above those in America for the first time since the 19th century, according to a report by the respected Oxford Economics consultancy. The calculations suggest that, measured by gross domestic product per capita, Britain can now hold its head up high in the economic stakes after more than a century of playing second fiddle to the Americans. It says that GDP per head in Britain will be £23,500 this year, compared with £23,250 in America, reflecting not only the strength of the pound against the dollar but also the UK economy’s record run of growth and rising incomes going back to the early 1990s. In those days, according to Oxford Economics, Britain’s GDP per capita was 34% below that in America, 33% less than in Germany and 26% lower than in France. Now, not only have average incomes crept above those in America but they are more than 8% above France (£21,700) and Germany (£2...