Martin Ellison's picture
Affiliation: 
University of Oxford
Credentials: 
Professor of economics

Voting history

The “Spend Now, Tax Later” Budget

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

Answer:
Moderately
Confidence level:
Confident
Comment:
There will be some effect as investment plans are brought forward, but there’s a feeling of “rearranging the deckchairs on the Titanic”. It may be that bringing investment forward uses up investment opportunities from the future. Summers (2017) (https://www.journals.uchicago.edu/doi/pdf/10.1086/690245) seems to be making this argument when he says “[t]o some extent, low rates work to stimulate demand by pulling investment forward. So today’s reduction in interest rates reduces tomorrow ‘s neutral rate by pulling forward investment”. It suggests that the super reduction may reduce R* in the future.

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:
Confident
Comment:
International competitiveness rests on many factors, only one of which is the corporate tax rates. There may be some negative signalling (“Britain is not open for business”) that contributes to the post-Brexit malaise. More importantly, the small yield of corporate taxes means the proposed change will only have a minor impact on fiscal sustainability.

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:
To borrow terminology from epidemiologists, for the debt to GDP ratio to fall it needs its R number to be below 1. This can be done by running budget surpluses or through nominal GDP growth. The OBR forecast a gradual decline in the debt to GDP ratio before the pandemic in March 2020 (so at the time R<1), and I see little reason why we would not return to R<1 once tax receipts rebound alongside GDP and acute health spending on the pandemic subsides. Nominal GDP will gradually chip away at the debt to GDP ratio so there is no pressing need to run large budget surpluses.

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

 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:
Aiming for market neutrality
Confidence level:
Very confident

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