Macroeconomics: UK economy, IB Economics

This BBC article looks at the implications of a falling birth rate for a developed economy, noting that there are only really two viable solutions. Either ensure that your population remains healthy and works for longer or accept the reality of the need for immigration 

The reality is that at some level most economies are going to opt for a mix of the two, because a rising number of dependents would mean that it will become increasingly difficult to finance healthcare and pension provision.

Paul Johnson's IFS do a great job, and their analysis of the Budget is another example of this. It's immediately apparent that one of the biggest effects of the Budget will be the implicit constraints on future public spending. And yet no-one, neither government nor Opposition, has really addressed this. 

He's right in calling both out over a lack of future tax and spending plans, although arguably whilst the government should have more of an idea, the Opposition haven't had much to time to formulate a coherent response.  That said, in that case, I'm surprised that more people haven't accused the government of economic vandalism, in seemingly putting party interests before the national interest with the Budget. 

Yet more speculation: National Insurance to be cut by 2p - a pre-election sweetener/bribe - and justified on the grounds of incentivising work, but to be offset against spending cuts in the next Parliament, effectively trying to restrict the ability of an incoming Labour government to alter government spending plans. 

In the best interests of the country, or an act of partisan politics tantamount to economic vandalism? You decide. 

The complex nature of policymaking is all too-apparent in this Guardian article about the Labour Party's proposed Green Investment Plan to fund a green transition. The original proposal for an immediate commitment to £28bn worth of spending has already been watered down, and now it looks like the whole thing is under review. 

The shame is that the prospect of pre-election tax cuts are being seen as, simultaneously, a pre-election bribe and an attempt to 'box in' the Labour Party and frame them as fiscally imprudent. 

It all goes to show that policymaking is almost always politically self-interested, and not in the national interest. And in this case, it seems that we've currently got the government that we deserve.  

It looks like electioneering has begun, with the traditional Labour pledge not to embark on a significant uplift in government spending. However, it's interesting to note the likely tenor of the speech at the launch of a Resolution Foundation report, which is going to suggest that current economic circumstances are worse than those inherited by the Conservatives in 2010 after the global financial crisis. 

National debt is higher, interest rates are higher and public services are in a far worse state than they were in 2010, and as a result Keir Starmer will argue that Labour's priority has to be economic growth to generate the revenues to finance spending.  

And here's yet another perspective on the Autumn Statement, with a number of commentators noting that today's announcements have effectively committed to the post-election Chancellor, whoever that may be, to austerity by default.

Of course, this is all part of the 'plan' - should Labour wish to adopt more ambitious spending plans they will be depicted as 'reckless'. But you might conclude that if this is the best that a party that's been in power for 13 years can do, it might have been even more 'reckless'. 

Prior to tomorrow's Autumn Statement, Phillip Inman has produced a little primer to highlight some of the policy options that he has, and provides a rough costing of them. The cheapest measure would be yet another cut in Stamp Duty, but everything else seems pretty expensive. 

In the light of the uninspiring fayre seeming being passed off as policy these days, Mariana Mazzucato's piece in today's Guardian is a call-to-arms.

She argues that rather than promising more of the same - of austerity, and fiscal caution - a radical government would adopt a new economic paradigm where there was a role for intervention to solve major problems like climate change, health, education and social care. 

She believes that a bold industrial strategy, clever alliances between the public and the private sectors, a public sector with enhanced capabilities and an engaged public could help overcome many of today's ongoing issues, starting with changing our mindsets towards becoming more resilient, more focused on sustainability and inclusivity and less defeatist. 

Today's Guardian editorial looks at local government finance, in the light of Europe's biggest local authority, Birmingham City Council going bankrupt. I'll keep you posted on the effects of this. 

However, it looks more widely at the fate of local government post-2010, noting that councils of various political hues, including Woking and Northamptonshire, have also declared bankruptcy, and the extent to which local government funding has been squeezed, something that you wouldn't necessarily associated with a government that has also pushed devolution and the election of local mayors, suggesting that unless local government is properly funded, more of this sort of thing is inevitable. 

Philip Inman's Observer piece looks at inter-generational inequality, arguing that another round of austerity is going to force the government to make interesting policy choices as to where to cut spending and raise taxes.

He suggests that this time the government should look very seriously at spreading the burden of this more fairly, and that the elderly need to bear their share, not least perhaps in wealth taxes on their capital gains on property and generous occupational pensions.   

Phillip Inman looks forward to the budget noting that the current mood music is very much about playing down next week's Budget. However, he's of the view that it's a concerted effort to keep the government's powder dry with an eye on 2024's General Election. 

He may well be right; but it's not a great way of policymaking in the national interest. 

James Meadway looks at the classic Labour Party dilemma: on succeeding the Conservatives, what is it going to do as regards public spending? If it pledges to increase spending, it will get criticised for being profligate. If it matches Conservative spending plans, it won't have the money to enact substantial change. 

His view is that last week's policy announcement suggests that Keir Stammer is going to opt for the former, and that this is unlikely to resolve many of the issues that face the UK. 

Will Hutton in today's Observer arguing that before the UK can make genuine economic progress, and heaven forbid return to growth, the first thing that needs to happen is for politicians to start telling the truth.

Far fetched that might be: however, he has a point. The UK isn't going to be a low tax, Singapore-on-Thames any time soon, and he lays out the reason why, starting with Brexit. The fact is that there's very much a sense that the pigeons have come home to roost, and that we're going to have to start tackling some pretty significant structural issues some time soon.  

Richard Partington is of the view that the recent raft of new policy measures - Rwanda, increased defence spending and so on, has overlooked one key area again.. Local government, which has borne the brunt of spending cuts since 2010. 

It's not sexy, it's not a vote-winner and it allows central government to highlight prominent instances of Labour-run councils going bankrupt, whilst conveniently avoiding similar Conservative-run disasters. However, irrespective whose in charge locally, it seems to result in ever-higher Council Tax bills for an ever-dwindling supply of local services.  

So, tax cuts to be funded by cuts in spending on the health service, according to the Institute for Fiscal Studies (IFS). It will be interesting to see how that plays, although, I suspect it will be spun as part of the re-adjustment to a post-Covid world. 

The phony pre-Budget war has started, with the Chancellor, Jeremy Hunt, telling the BBC that the government have less scope for tax cuts than it might seem.

It's a classic strategy, lowering expectations, creating the impression of fiscal prudence and then...let's wait for the Budget.

Richard Partington summarises the fiscal debate, arguing that, for all the smoke-and-mirrors, it's Conservative policy that requires the greatest scrutiny because of its lack of plausibility, rather than any incoming Labour government. 

He argues that if you look at existing Conservative commitments to defence and overseas development assistance, for example, then any promise to cut taxes simply isn't feasible, and has been recognised as such by the Institute for Fiscal Studies. However, flinging mud is easy. the reality is that growth, whatever it's form is going to require higher levels of investment and at the moment only one party seems to have any sort of plan for that. 

Phillip Inman's piece in today's Observer looks at how the rising cost of government post-pandemic has meant a search for new ways of financing government spending. He argues that, surprisingly, there's been little mention of wealth taxes, with critics arguing that they don't raise much money and have an adverse effect on productivity. 

Of these reasons, the first strikes me as the most valid; the second, is, in my experience a nonsense, supported by the fact that many of the latest additions to the list of global billionaires have inherited the majority of their wealth. 

A primer for what to expect from the Guardian, looking at everything from government finances to taxes, benefits, support for businesses and investment. 

The cost of servicing government debt has reached 5.5%, a 20 year high, something which has an opportunity cost, not least in terms of affecting government spending and taxation. At present, the total national debt is "about £2.59 trillion": the good economists among you should be capable of understanding the extent to which this is, or is not, problematic.  

Should the UK govenrment be spending more on green investment? Certainly Presidential adviser, Heather Boushey thinks that doing so will speed the transition to green energy, increase energy security, create jobs and there's even a rare sighting of the phrase "crowding in". 

Are you 100% certain what it means? 

Kate Pickett, one of the authors of "The Spirit Level", writes in today's Guardian about the fact that although fifteen years have passed since the global financial crisis, and fourteen since the publication of the book, little has changed as regards inequality. 

She argues that rather than opting for continued austerity, the Labour Party needs to return to a Keynesian agenda of increased government spending to support public services and tackle poverty.  

The latest snapshot of public finances has thrown up this interesting headline - that government debt has exceeded 100% of national income for the first time since 1961. 

But what does this mean? In the short-term, relatively little. It's almost a 'so what?' moment - however, in the longer-term it has implications for government spending, particularly if the rate at which the government can borrow increases, and this has implications for macroeconomic objectives more widely. 

The levelling up myth - the government responds to the notion - heaven forbid - that levelling up is a rhetorical device rather than a policy commitment. 

£2.1bn in funding has been announced for 100 projects, with the government claiming that this represents a tilt to the North in its policymaking. I'd argue that 'bribe' rather than tilt might be a more appropriate description. 

OFGEM have revealed that without government intervention, energy bills would have risen to £4,279 from January. This means that the cost of government intervention has significantly increased.

The existing Energy Price Guarantee (ERG) means that "suppliers can charge a maximum of 34p per unit for electricity and 10.3p for gas until the end of March", whereas government help, "consumers would have had to pay 67p per unit for electricity and 17p for gas from January". The difference between the two is going to be financed by the government.