Michael Wickens's picture
Affiliation: 
Cardiff Business School & University of York
Credentials: 
Professor of economics

Voting history

Addressing UK public finances after the mini-budget crisis

Question 2: Relative to the Autumn statement, would the UK be better off reducing public debt

Answer:
Substantially slower
Confidence level:
Confident
Comment:
As explained, the debt-GDP ratio is already falling due negative real interest rates. Fiscal austerity just reduces growth and economic welfare. Despite the recent market tantrum, UK's the debt-GDP ratio is lower than, for example, the US and Germany, and the UK has never defaulted on its debt, so rationally the markets should not be concerned about a slow reduction in the UK's debt-GDP ratio.

Question 1: How necessary was it for the UK government to lower its deficit through tax increases or spending cuts in November 2022?

Answer:
Desirable
Confidence level:
Confident
Comment:
The aim of government policy should be to improve people's welfare. The main practical implication of this is to keep inflation low and growth high. At present inflation is high and growth is low. Reducing the deficit or government debt is justified only if it is consistent with improving welfare. As far as the fiscal position is concerned, the aim should be to reduce debt. Reducing the deficit achieves this and historically the UK has run primary surpluses. But historically inflation has been a larger influence on reducing the debt-GDP ratio while growth has not been a large factor. At present, thanks in part to the incompetence of the Bank of England, the real rate of interest less growth is heavily negative. This implies that the debt-GDP ratio will steadily fall over time without any deficit reduction. So reducing the deficit is not strictly necessary. Moreover, it will reduce growth which will slow the automatic reduction in the debt-GDP ratio. If, of course, real interest rates were to become positive then, given the UK's low growth, deficit reduction would become essential for the debt-GDP to fall.

Assisting Households Facing Rising Energy Costs

Question 3: Should a windfall tax be used to (fully or partially) finance support to households?

Answer:
Yes
Confidence level:
Not confident
Comment:
The windfall gains are a rent and rents like this are taxable. This leaves the issue of what to do if there are windfall losses in the future.

Question 1: Overall, which of the following best characterises how the government’s proposed energy policies will leave the average UK household over the medium term:

Answer:
Better off
Confidence level:
Confident
Comment:
This is a short-term measure to deal with the gas price rise caused by the attack on Ukraine. It was made worse by the decision to stop storing gas which removed an important price buffer. It should have been better targeted. The current crisis is partly self-induced due to the failure to replace fossil fuels in the premature dash to a zero carbon economy. We still don't have a long-term solution.

Levelling Up Productivity Gaps in the UK

Question 1: What is the primary factor driving regional productivity disparities in the UK?

Answer:
Transportation and connectivity
Confidence level:
Confident
Comment:
Clearly all contribute. And different areas have different primary factors. In York, where I live, as in the rest of Yorkshire and Humber, poor transportation and roads are a major factor. There is still no dual carriageway to Scotland from the Newcastle. The same is true of roads connecting Sheffield to Manchester. And rail is even worse across the north.

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