Join The New Protest Movement – Fiscal Rebellion

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Afternoon all,

The Budget’s off. This is very good news for the RF team’s workload. But it is very bad news for democracy, if the election’s still on. That’s because no Budget means no updated Office for Budget Responsibility forecasts for our economy and public finances – forecasts that should provide crucial context for the promises parties make. This is especially prescient given the recent news of higher borrowing here at home, and slower growth globally.

The government could, and should, allow the OBR to publish the forecasts they’ve already prepared. The “set the forecasts free” Fiscal Rebellion protest starts now. It’s going to make the climate change versions look tame. Shout along with us: “What do we want; independent forecasts. When do we want them; well ahead of polling day.”

Have a good weekend,

Chief Executive
Resolution Foundation

Climb it. What does climbing El Capitan (a stunning, but huge cliff in Yosemite, California) without a rope in sight tell us about economic growth? That’s question asked in this great blog inspired by the film Free Solo (highly recommended). The answer: machines are not the only engines of economic growth. Humans creating and sharing knowledge about how to climb ever more extreme routes has made huge vertical progress possible – and the same drives much economic growth, but often gets ignored amid all the tech fetishising. Well worth your time – and not just for the surprisingly large group of us that really like economics AND climbing.

Foot off the (debt) brake. Fiscal Rebellion is already spreading across Europe – with policymakers turning on their own inventions. The Financial Times (£ but free in Irish Times ) reports that Christian Kastrop, an ex-German finance ministry official, has publicly turned on Germany’s ‘debt brake’, a policy he co-authored. The ‘brake’ enforces strict fiscal discipline, committing the German government to borrowing of below 0.35 per cent of GDP. Kastrop has now joined the growing consensus, including Mario Draghi and Olivier Blanchard, arguing that with interest rates at historically low levels now is the time to invest in infrastructure and tackling climate change. But because of the very rule Kastrop helped create, this would require a two-thirds majority to amend the German constitution. Instead, there is talk of circumventing the debt rule by creating an off balance sheet ‘shadow budget’. Thankfully, the UK has fewer constitutional barriers to adapting our fiscal framework. We’ll publish our plan for a new fiscal framework for the UK on Tuesday.

Growth-stifling inequality. ‘A rising tide can’t lift all boats when some can’t even get launched’, argues Heather Boushey’s new book Unbound: How inequality constricts our economy and what we can do about it (the cash- or time-strapped among us can read the New Yorker review). Heather, previously of team Hilary and now part of a reinvigorated economic thinking on the US left, delves into the effects of inequality on economic outcomes and makes the case for measures of inequality to be taken seriously as headline economic indicators like GDP. She argues that far from there being a trade-off between efficiency and equity, inequalities of race, gender and geography actively stifle economic growth. For more join us at RF (or via live stream) on 12 November for the book launch.

Liberal Britain. Something a bit different to perk you up over the weekend – amid all the political and economic divisions, a new study shows that the country is in other ways moving together with huge changes in moral attitudes in Britain over the past 30 years. We’re becoming much more socially liberal, with the proportion of Brits thinking that homosexual relationships are morally wrong now down to 13 per cent, from 40 per cent in 1989. Likewise the proportion thinking abortion is wrong has halved from 35 per cent. The less good news for a country heading to the polling stations is that 30 years ago 36 per cent of people agreed that “in general, politicians are good people”. This has now more than halved to just 15 per cent.

Employing the youth. Do financial incentives for firms to employ young workers work? The answer from a new study (free here) is…. yes, and by more than you might think. Examining the impact of a tax cut in Sweden for firms hiring workers aged 26 or less, it finds the obvious effect of higher employment for these workers because they became 12 per cent cheaper. Crucially though, it finds the effect lasts in two important ways. First, the higher employment lasts even once people age beyond the 26 year old cut-off. Second, even after the policy was suddenly abolished in 2015, employment remained elevated for younger workers (at least so far). The authors argue this could be because firms got used to using younger labour (either in the way they work, or in how they hire). These lasting effects would make interventions like this much better value for money, and provide pause for thought for those of us generally sceptical of such schemes (see the coalition government’s failed attempt to offer short term employment subsidies for the youth).

Chart of the Week

While everyone’s transfixed by hourly movements in the odds of Brexit/an election happening, our broader politics, economics and society are also being shaped by far slower, and bigger, trends – such as an ageing society. We’ll explore how this is playing out (very differently) in local areas across the UK on Monday (watch it here), but this week’s Chart offers a taster, bringing these fast and slow trends together. It shows how the age of parliamentary constituencies is an increasing determinant of which party’s candidate gets returned to Westminster – with older places increasingly becoming safe Tory seats and Labour’s new heartlands being full of the youth. This has happened despite the overall trend away from party allegiance. The danger here is that this gives the main parties a big incentive to focus on appealing to their older/younger core supporters and ignore the opposite ends of the age spectrum – bad news for a country struggling with generational divides.