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

Voting history

Prospects for UK Economic Growth

Question 2: What is the most important contribution economic policymakers can make growth in the UK over the next decade? 

Answer:
Other or don't know
Confidence level:
Confident
Comment:
Policymakers can't do much to improve growth in the next decade. To enhance growth they need to stop interfering in the economy and instead encourage private enterprise. This will be challenged by those who see the role of government as leveling up incomes. Leveling up should be confined to public infrastructure projects, especially in the North, and not income transfers.

Question 1: How do you see prospects for future (per capita) GDP growth in the UK in the next decade?

Answer:
Low growth because of worldwide structural challenges
Confidence level:
Not confident
Comment:
Growth rates are difficult to predict. Long-run growth is mainly due to supply side factors. Except in the short run, growth has little to do with demand or stabilisation policy. Currently the UK is facing stagflation due to worldwide factors. The experience of the 1970's shows that it is better to take a short-term hit to growth to control inflation than to try to sustain demand in the face of a big supply shock. This is a lesson that seems to have been forgotten.

The Impact of the Russian Invasion of Ukraine on the UK Economy

Question 3: Relative to tax plans at the beginning of the year, the UK government should respond by:

Answer:
Cutting tax rates, but allowing revenues to increase via inflation
Confidence level:
Confident
Comment:
It is essential to allow prices to rise as explained before. And inflation will reduce the real burden of borrowing to fund tax cuts. The question is whether tax cuts are the best way of ameliorating the problems of the poorest. Probably not. Tax cuts are best aimed at increasing general demand and growth, not helping the poorest as they pay little tax.

Question 2: Relative to the public spending plans at the beginning of the year, the UK government should respond by:

Answer:
Increasing public spending, but less than inflation
Confidence level:
Confident
Comment:
See first answer

Question 1: Relative to the Bank of England’s planned trajectory for interest rates at the beginning of the year, the Bank should respond to geopolitical events by:

Answer:
Raising interest rates more slowly
Confidence level:
Very confident
Comment:
The Bank is already behind the curve on interest rate increases. The current price rises due to the new and further supply shortages can be seen as the global market's attempt to adjust demand to supply. A reduction, or holding back planned increases, in interest rates would only increase UK demand when what is needed is a fall in demand. This is what the UK did in the 1974 oil crisis which resulted in the UK having higher inflation than other countries. It was later widely acknowledged that this was the wrong choice. The best the UK can do is reduce the burden on poorer families through fiscal policy.

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