Economists call for a fiscal tightening

A group of leading economists has written to the Sunday Times stressing the need for a credible and timely start to reducing the UK government’s fiscal deficit. The letter can be found here.. Among the letter’s signatories are Kenneth Rogoff, a former chief economist at the International Monetary Fund; Howard Davies, director of the London School of Economics and former head of the Financial Services Authority; and Roger Bootle, former chief economist at HSBC

There is plenty of interest and significance here for A2 students

“The bulk of this fiscal consolidation should be borne by reductions in government spending, but that process should be mindful of its impact on society’s more vulnerable groups. Tax increases should be broad-based and minimise damaging increases in marginal tax rates on employment and investment”

1/ What is a structural budget deficit?
2/ Why do the economists favour cuts in government spending over higher taxes?
3/ Can you think of broadly-based tax increases that might be introduced?
4/ Why are the economists concerned about the impact of higher marginal tax rates on employment and investment?

More here from the BBC: Economists urge swift action to reduce budget deficit


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