Patrick Minford's picture
Affiliation: 
Cardiff Business School
Credentials: 
Professor of economics

Voting history

Prospects for Economic Growth in the UK April 2014

Question 1

The long period of slow or negative growth might imply that there is a substantial output gap in the UK economy.  Do you agree that there is currently a larger output gap than the OBR estimate to the extent that the shortfall in output relative to capacity is 3% or greater?  

Answer:
Strongly Disagree
Confidence level:
Confident
Comment:
The situation is complex. The crisis has generated genuine reductions in 'capacity' ie ability to produce with available capital stock, labour supply willing to work and current technology. Thus simple 'demand stimulus' would be largely ineffective. Thus OBS-style output gap measures seem about right, reflecting mainly ease of employing more labour. However, policy is capable of restoring much capacity/productivity growth so that in the longer term the growth rate could be higher for a long period to come. Such policy includes cutting back aspects of the new bank regulative system that is both too burdensome on small banks, and weighted heavily against lending to SMEs; restoring competition in energy and cutting back misdirected renewable subsidies and associated taxes/regulation; other general supply-side reforms of a standard pro-business type.

Responsible long-term fiscal policy (pilot survey)

Second question:

To help ensure that advanced country governments pursue responsible fiscal policies, countries should adopt formal rules for limiting structural deficits, which are supported by primary legislation or constitutional reform.

Answer:
Disagree
Confidence level:
Confident
Comment:
Budget deficits are needed in times of emergency. Yet commitment to responsible fiscal behaviour (ie at present to getting debt down again as % of GDP) is also necessary. Constitutional rules will simply obstruct the former while not adding to commitment; indeed their necessary breaking would create noise. I prefer the current experiment with a 'Fiscal Advisory Authority in the UK ('Office of Budget Responsibility'). Here commitment is maintained via the need to demonstrate soundness; but ability to respond to events is preserved.

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