Andrew Lilico of Policy Exchange (plus many other areas, such as the Shadow MPC), has come up with an interesting compromise for those Centre-Right thinkers who are both annoyed by the high level of public spending, and worried about the macroeconomic consequences of cutting the deficit.   Why not do a temporary tax cut at the same time?

A lot of precedent overseas suggests that it is easier, politically, to cut soon.   But Keynesian macroeconomics argues against it.  Does this square the circle?

I would be interested to know which tax cuts will have the same bang-for-buck as spending, but they do at least have less distortionary effects, particularly if well-targeted on high marginal spenders.  Perhaps lift the income tax threshold?

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4 thoughts on “Interesting idea on CentreRight

  1. Temporary cut in NI contributions.

    Worth having as an automatic stabilser actually. Hey, we’re in a recession, great, cut NI rates. Fast, simple, money flows into pay packets within a month (for some a week).

    Vastly faster than any spending changes……

  2. And Martin Wolf today seems to agree with the broad thrust. (last para but 2)

    Met someone today who has met R Murphy. Makes your views seem mild.

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