Nicholas Oulton's picture
Affiliation: 
London School of Economics
Credentials: 
Senior Visiting Research Fellow

Voting history

Greece’s elections and the future of the Eurozone

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Question 1: Do you agree that a Syriza victory on 25 January would lead to a significant or sustained escalation in spreads for other peripheral Eurozone countries?

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Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
The markets are already anticipating a Syriza victory so this has to be bad news for other highly-indebted Eurozone countries. The only counter to this would be massive QE by the ECB focused on Spanish, Portuguese and Italian government debt. But nobody seems to think this is likely because of German and other objections. It is not that governments currently in place in Spain, Portugal and Italy are going to seek debt forgiveness but rather that they will be replaced by other political movements (e.g. Podemos in Spain) who would be so inclined. Or at least that is a risk which markets will take into account.

2014 Autumn Statement

 

Question 2: Do you agree that the underperformance of tax receipts in recent years, provides a strong case for higher taxes?

Answer:
Disagree
Confidence level:
Confident
Comment:
Since I believe (subject to the caveats in my answer to the first question) that the UK will grow more rapidly than the OBR currently forecasts I expect tax receipts to revive. So I see no case for higher taxes now. Of course those (unlike me) who want a bigger state should definitely be in favour of higher taxes.

Question 1: Do you agree that the scale of this planned reduction in total managed expenditure is credible?

Answer:
Agree
Confidence level:
Not confident
Comment:
I think that the planned reduction can be achieved but I am not confident that it will be. This is mainly because of political risks. Who knows who will be Chancellor in 2019-20? Also our recovery could be derailed by another disaster in the eurozone which would dictate a relaxation in fiscal policy. On the positive side, the reduction can be achieved by growing the denominator, GDP, as well as by reducing the numerator, spending. I am more confident than the OBR that productivity growth will revive. In my view the OBR gives too much weight to the disappointing experience since 2007 and not enough to the good performance before then. The OBR has output per hour growing at only 2% even in 2019-20 which means that the level of output per hour will still be about 14% below its pre-crisis trend. Though the crisis will have caused permanent losses I think their figures are too pessimistic. So I expect faster productivity growth to reduce the spending/GDP ratio. .

Devolving Income Tax Powers within the UK

Question 2: Do you agree that that there is a clear economic case for establishing "English votes for English laws" with the same tax and spending powers as the Scottish Parliament?

Answer:
Strongly Agree
Confidence level:
Extremely confident
Comment:
If devolving more power to Scotland and Wales is a good idea, the same must be true a fortiori for England. In addition there cannot be any argument in equity for giving Scottish and Welsh MPs power over English affairs while denying the same powers to English MPs. However the real debate in England may be over what powers to devolve from a putative English parliament to English regional assemblies or metropolitan regions. Should a north eastern authority have the power to build a new bypass around Newcastle, using borrowed funds if necessary, or should this always be the responsibilty as now of the Highways Agency funded by the UK Treasury?

Question 1: Do you agree that the economic benefits of devolving full income tax powers to the Scottish Parliament and Welsh Assembly outweigh the possible costs?

Answer:
Disagree
Confidence level:
Not confident
Comment:
The referendum debate in Scotland featured a lot of fantasy economics. Many Yes voters seemed to think (and the SNP encouraged this) that independence would mean a juster and fairer society in which welfare spending would be higher. Devolving full income tax powers to Scotland (and Wales) has the advantage that this belief could be tested. We will then be able to see whether the Scots are in fact willing to pay the bill for this vision. However, devolving full tax income tax powers may be going too far since it may lead to undesirable tax competition within the UK.

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