IEA responds to PM’s plan for the UK’s economic recovery
IEA Senior Academic Fellow Professor Philip Booth responded to the Prime Minister’s plans for the UK’s economic recovery post Covid-19
“We should be wary of hype about a ‘Rooseveltian’ New Deal. To begin with, the impact of the original New Deal was not positive. The US had the longest Great Depression of any major Western economy. The UK recovered more quickly, with fiscal restraint and supply-side policies which allowed the private sector to recover, including through house building. West Germany’s experience after the Second World War was similar. When the economy has a supply shock, we need to liberalise to allow it to adapt, not borrow and print money.
“Covid does not change the arguments for infrastructure spending. It should be pursued if it has a positive rate of return, after allowing for risk. The UK government has been extremely bad at picking profitable projects – HS2 being only the latest example. The government should therefore make way for the private sector to finance investment and take on the risk itself.”
IEA Economics Fellow Julian Jessop added:
“Private investors are willing to invest in infrastructure, but there should be no return to the expensive PFI of the past. Private investors should fully take the risk whilst benefiting from the full returns from the project without expensive regulation and legal obstacles imposed by the Treasury.
“In fact, Johnson’s speech actually contained little new – and this is a relief. He has announced some more infrastructure spending, including £5 billion on specific projects. But the March Budget had already promised more than £600 billion in new investment over the next five years. Some of this is just being repackaged as a response to the Covid crisis.
“There should already be enough pent-up demand to reboot the economy, without the government needing to spend and borrow even more. Policy should now focus instead on supply-side reforms, including the liberalisation of planning rules and some well-targeted tax cuts.
“This should be enough to help get unemployment down again. Infrastructure projects should stand or fall on their own merits, not as schemes to ‘create’ jobs.”
IEA Editorial and Research Fellow Len Shackleton added:
“The Prime Minister’s offer of a guaranteed apprenticeship or in-work placement for every young person is wishful thinking. History suggests that governments are rarely successful in promoting high-quality apprenticeships; for example, the apprenticeship levy under Mrs May actually led to a fall in the number of apprenticeships available, very few of which were degree-equivalent.
“If the UK labour market is to recover quickly, the government needs to concentrate on relieving employers of burdensome taxes and employment regulation, rather than trying to manipulate their training policies in a direction that policy-makers think best.”
For media enquiries, contact Emily Carver, 07715942731
IEA Economics Fellow Julian Jessop and IEA Senior Academic Fellow Professor Philip Booth are both available for further comment.
Further IEA reading on how the UK economy can recover from Coronavirus here.
Further IEA reading on apprenticeships here.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
PM Economy Speech: 30 June 2020
Latest News from
IEA - Britain’s nanny state continues to expand, finds new international ranking01/06/2023 09:25:00
The UK is among the most authoritarian countries in Europe for food and soft drink, tobacco, and alcohol regulation
IPPR - Government failure to eradicate poverty holds back economy and damages livelihoods, new research reveals31/05/2023 15:15:00
Leading anti-poverty charities publish research showing that ending poverty is not just morally right – it's also an economic imperative
JRF - Sky-high food price inflation shows the corner hasn't been turned for struggling families24/05/2023 16:20:00
Inflation has fallen today but new JRF analysis shows that since inflation began to rise in April 2021, costs have risen by almost a fifth in the last two years. Energy prices have more than doubled, and food prices have increased by over a quarter.
IEA - Sticky inflation could mean higher interest rates24/05/2023 15:20:00
Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, commented on the latest Office for National Statistics (ONS) consumer price inflation figures
Sunday Times Rich List shows tax reform 'more urgent than ever' says IPPR22/05/2023 10:10:00
Dr George Dibb, head of the centre for economic justice at IPPR, responded to the latest Sunday Times Rich Lis
Faith provides the foundations for free markets, says new IEA book22/05/2023 09:10:00
An upcoming book from the Institute of Economic Affairs suggests that the foundations of a free society can be found in the teachings of the three major Abrahamic religions
IFS - A deepening freeze: more adults than ever are paying higher-rate tax18/05/2023 11:20:00
How many people pay higher rates of income tax? We analyse the large increases in the share of adults paying the 40% rate or above since 1991–92.
IEA - New rental rules risk backfiring17/05/2023 16:20:00
Matthew Lesh, Director of Public Policy and Communications at the Institute of Economic Affairs comments on the introduction of the government’s rental reforms legislation
IPPR - More people are now out of work due to ill health than any other time since records began17/05/2023 15:20:00
Chris Thomas, head of IPPR's Commission on Health and Prosperity responds to the latest inactivity stats in the UK from the ONS showing that 2.55 million people are out of the labour market due to long-term sickness