Morten Ravn's picture
Affiliation: 
University College London
Credentials: 
Professor of economics
Head of Department

Voting history

Greece’s elections and the future of the Eurozone

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Question 1: Do you agree that a Syriza victory on 25 January would lead to a significant or sustained escalation in spreads for other peripheral Eurozone countries?

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Answer:
Disagree
Confidence level:
Very confident
Comment:
I think that there would be an increase in the spreads for other peripheral countries in the SHORT RUN but I do not think they will persist. In the short run, contagion effects are likely to increase spreads. Obviously, if Syriza wins and successfully negotiates a debt write-down, it sets an example for other countries and therefore could lead to a sustained increase in spreads. But I think this is unlikely for many reasons. First, any concessions from the Troika are likely to impose other costs on Greece. Secondly, there is already some decoupling between Greece and other peripheral countries in that their outlook and economic conditions do differ significantly. Only in the unlikely event that the situation is handled in a very bad manner giving financial markets reason to believe that other peripheral countries will receive similar treatments do I see a reason to expect a SUSTAINED escalation in spreads for other peripheral Eurozone countries.

2014 Autumn Statement

 

Question 2: Do you agree that the underperformance of tax receipts in recent years, provides a strong case for higher taxes?

Answer:
Disagree
Confidence level:
Very confident
Comment:
The underperformance of tax revenues is probably quite closely related to the changes in the income distribution combined with tax exemptions at the lower end and increasing marginal rates at the higher end. On the other hand, these aspects are also important for understanding why employment is recovering and why the UK economy is doing well in terms of income growth. Increasing taxes would be very likely to produce higher tax revenues (I do not think that we are on the wrong side of the Laffer curve) but would also endanger the recovery.

Question 1: Do you agree that the scale of this planned reduction in total managed expenditure is credible?

Answer:
Disagree
Confidence level:
Very confident
Comment:
It is only credible to the extent that welfare expenses and other sources of income transfers fall more than expected which would require either a much larger growth in the economy than expected or political willingness to cut transfers to low-income households. The latter is politically difficult not the least because pensioners would be hard to protect from such cuts. Thus, in the absence thereof, either spending in other government departments would have to fall, the stabilization of public debt would take much longer or tax revenues would have to increase. A large cut in government departments is difficult given that the NHS is being ring fenced thereby forcing other departments - such as education - to be cut much deeper. At the end of the day, it is most like that the outcome will be a balanced mix of all these options unless the economy recovers even more than expected (therefore producing a larger than expected rise in tax revenues and a larger than expected fall in income transfers).

Devolving Income Tax Powers within the UK

Question 2: Do you agree that that there is a clear economic case for establishing "English votes for English laws" with the same tax and spending powers as the Scottish Parliament?

Answer:
Disagree
Confidence level:
Extremely confident
Comment:
It would seem logical to have the English Votes for English Laws if there is full devolution to the Scottish Parliament. But in the absence thereof, I see no reason for taking this step. It would potentially lead to a fragmented fiscal union which I do not see as a good outcome.

Question 1: Do you agree that the economic benefits of devolving full income tax powers to the Scottish Parliament and Welsh Assembly outweigh the possible costs?

Answer:
Disagree
Confidence level:
Extremely confident
Comment:
I disagree with FULLY devolving income tax powers to the Scottish Parliament and the Welsh assembly. I agree that some fiscal federalism is a good idea. Here is where I come from: Devolving fiscal authority definitely have advantages in terms of bringing spending and taxing powers closer to the local communities thereby catering better for local preferences, needs, and building better on local knowledge. Against this are aspects such as the loss of a fiscal instrument for macroeconomic stabilization for the central authority, the issue of externalities, and how to deal with regional disparities. A simple principle in terms of devolving tax power would be to decentralize the taxation of the least mobile and least elastic sources of income which one would think relates to consumption and income taxes. However, full devolution of income taxation, I believe, would be sub-optimal because of the large income differences across UK regions. Welsh income per capita is much below the UK level. With a fully decentralized system it is unclear how transfers could be sustained in the longer run. Moreover, although full devolution could help increasing the efficiency of the fiscal system within regions, the ensuing tax competition between local authorities could have negative side effects in terms of lower revenues which would have to be felt on the spending side (such as putting pressure on cutting health and education bills). Thus, I think a partial devolution would be a preferred outcome.

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