IEA - Overspending should not be the new normal
IEA reacts to chancellor Philip Hammond's speech
Commenting on the Chancellor’s speech, Mark Littlewood, Director General at the Institute of Economic Affairs, said:
“The Chancellor is paying lip service to long-term economic prudence, but in reality the UK is settling down to become a high spend, high debt economy. The UK now has the fifth highest deficit in the OECD, just after Greece, Japan, Portugal and Spain. Whilst it’s encouraging that the new government is committing to making a success out of Brexit and, belatedly, focusing on improving productivity, we still need to focus on living within our means.
“Whilst George Osborne’s fiscal rule may have been crude, it shouldn’t have taken the Government six years to get to this feeble point. It’s no longer a case of fixing short-term problems; overspending and running a deficit has become the new normal.
“On the face of it, infrastructure spending sounds beneficial, but in practice it fails the test when it comes to economic credibility. Too often, prestige projects trump sensible investments; HS2, for example, has an extremely low cost-benefit ratio. The Chancellor’s new housing fund also misses the point. The key problem with unaffordability is not that there’s a lack of financing, but that there are restrictions on where and how we can build.”
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