Former U.K. Chancellors Tell Sunak How to Revive Economic Growth
Former U.K. Chancellors Tell Sunak How to Revive Economic Growth
(Bloomberg) -- Chancellor of the Exchequer Rishi Sunak is receiving some simple advice from his predecessors: follow us if you want to power up the British economy.
With the U.K. facing the deepest recession in at least a century, Sajid Javid, the man Sunak dramatically replaced in February, laid out a series of 63 recommendations in a report written for the Centre for Policy Studies. They highlight the need for infrastructure spending to even out regional inequalities -- the focus of Javid’s policy during his brief tenure as finance minister.
The advice published Tuesday comes a day after Alistair Darling, Labour’s chancellor during the financial crisis, recommended a cut in sales tax -- the same tactic he used in 2008.
The pleas come amid a growing debate about how Sunak can revive an economy devastated by the coronavirus pandemic, and how quickly emergency spending needs to be wound down. Javid’s blueprint calls on Sunak to prioritize growth as lockdown restrictions ease, rather than focus on spending cuts and tax rises to repair the fiscal damage.
The budget deficit is on course to reach almost 300 billion pounds ($373 billion) in the current fiscal year, the highest since World War II, and figures last week showed government debt topped 100% of gross domestic product for the first time since the early 1960s.
Javid echoed Darling’s call for a cut in Value Added Tax, and said Sunak should look to reduce the cost of hiring by cutting National Insurance Contributions paid by employers. He also advocated a new fiscal rule -- borrowed from his playbook as finance minister -- under which non-investment spending and revenue would be brought into balance within three years, but only when a stable recovery has been achieved.
The report also suggested a review of the Bank of England’s monetary policy framework, and asked whether the current inflation target should be replaced with a nominal GDP goal.
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