David Miles's picture
Affiliation: 
Imperial College
Credentials: 
Professor of economics

Voting history

COVID-19 and UK Public Finances

Question 2: What is the best way to (eventually) reduce public deficits and debt?

Answer:
None of the above, other, or no opinion
Confidence level:
Confident
Comment:
The best way is to do so gradually (bond markets permitting) and let economic growth do its work. Should real interest rates on gilts remain at negative levels it will not take much growth to bring D/GDP down.

Question 1: How urgently should the UK government address the rise in public debt?

Answer:
There is no need to take or announce any budgetary actions to reduce the deficit or the public debt until the end of the pandemic
Confidence level:
Confident
Comment:
Assuming the pandemic is - effectively - over by some time in the first half of next year and (crucially) that yields on gilts do not spike upwards then announcing a strategy now to bring down the debt to GDP ratio is neither needed nor useful. It is not useful because until we know the state of the economy and the level of debt at the end of the pandemic it is not realistic that people will believe any strategy.

The Eurozone COVID-19 Crisis: EU Policy Options

Question 2: What is the best mechanism to pay for economic support provided by and to EU member states to combat the COVID-19 crisis?

Answer:
Expanded EU budget (with possible borrowing at the EU level)
Confidence level:
Not confident
Comment:
see answer to first question

Question 1: What is the total size of funding that you would advocate at the EU level in support of its members to weather the COVID-19 crisis this year?

 

 

Answer:
5-10% of GDP
Confidence level:
Not confident
Comment:
The key issue is not so much how much economic support from the state is needed in EU countries - it is from which states should most of this come (i.e. largely from the national state or largely from the union of states in the form of central EU support). Since moral hazard problems seem largely absent then on risk sharing grounds more than is usual should probably come from the EU budget.

Covid-19: Economic Policy Response

Question 3: Which would be the maximal public debt you would be willing to tolerate if used effectively (as in your answers to 1 and 2 above) to support an economic recovery?

Answer:
140% of GDP (e.g. if fiscal support were trippled)
Confidence level:
Not confident
Comment:
Who knows what may be needed. The UK ended the Napoleonic wars and the first and second world wars with vastly higher debt to GDP than 140% of GDP . That debt came down fairly smoothly.

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