Ethan Ilzetzki's picture
Affiliation: 
London School of Economics

Voting history

The “Spend Now, Tax Later” Budget

Question 3: Which of the following best characterizes the pace at which the budget addresses UK’s medium term fiscal challenges (deficit and debt)?

Answer:
Just right
Confidence level:
Confident
Comment:
I am not concerned about the levels of public debt, but certainly, the UK cannot borrow at the current rate forever and the OBR predicts some permanent damage to public finances. It was correct not to increase taxes in the upcoming two years and it is sensible to provide some clarity on the way the budgetary gap will be closed in the medium term. I put a high probability on further adjustments down the road as uncertainty abounds. But I do find it useful that the government has provided clarity on the types of measures it might take should deficit reduction prove desirable or necessary. On the measures themselves, I would have preferred to see more progressive tax measures on the personal income tax side.

Question 2: To what extent will the “super deduction” aide the UK’s recovery from the Covid recession?

Answer:
Moderately
Confidence level:
Not confident
Comment:
The super deduction will largely remove the cliff-edge created by the increase in corporate tax rates and may further accelerate investment in the short run. However, the corporate sector will exit the pandemic with substantial debt overhang and the question is whether more generous tax deductions for investment will be able to avert this drag on investment.

Question 1: How will the increase in the corporate tax rate from 19% to 25% affect the UK’s international competitiveness in the medium term?

 

Answer:
Moderate damage
Confidence level:
Not confident

The ECB’s Green Agenda

Question 2: Would you support changing the ECB’s mandate to incorporate the EU’s target of carbon neutrality by 2050, if such a change is deemed legally necessary to adopt your preferred approach?

Answer:
No
Confidence level:
Very confident
Comment:
See my response to Q1

 Question 1: Which of the following actions is the most advisable approach for European Central Bank to address the environmental impact of its bond-purchasing policies?

Answer:
Other or no opinon
Confidence level:
Confident
Comment:
Climate change is arguably the greatest challenge facing humanity, but it is best addressed using fiscal rather than monetary policy. Central banks are best suited to address price stability and stabilization policy. They are not institutionally suited to address problems in the realm of taxation and public finance, where climate change should be addressed. The ECB's bond-purchasing programs are distortionary and biased on many dimensions, not only environmental. If these distortions are deemed large (as I think they are), we should reconsider QE, rather than turn it into a permanent policy fixture aimed at (ineffectively) addressing one of the biggest policy challenges on the agenda. QE may well have been desirable during the Eurozone crisis and Covid-19, but we should aim to make it temporary and rare, in which its long run consequences (on the environment and everything else) will be limitted.

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