Cut red tape to boost growth? Start with immigration

With the economy persistently weak, there is a growing consensus among economists that premature austerity has done considerable unnecessary damage, and that there is a strong case for slowing fiscal consolidation -  at least to restore some of the unnecessary and damaging cuts to public investment (which have been the source of most of the deficit reduction so far). However,  others have instead argued that the problem is not on the demand side, but on the supply side, and that what is needed is a radical programme of deregulation - "cutting red tape" - especially in the labour market.  

The impact of alternative paths of fiscal consolidation on output and employment

NIESR has just published research estimating the economic impact of immediate versus delayed fiscal  consolidation in the UK.  The research was undertaken by Dawn Holland (NIESR), John Van Reenen, Professor of Economics at the London School of Economics and Director of the Centre for Economic Performance, and Nitika Bagaria, a Phd student also at LSE and CEP.  John and I have written an article for the FT(£). 

NIESR's UK forecast, August 2012

NIESR's quarterly forecast for the UK economy is published today. Highlights: 

• The economy will contract by 0.5 per cent this year, but grow by 1.3 per cent in 2013.

• Consumer price inflation will fall below the 2 per cent target by the end of 2012.

• Unemployment will peak at 8.6 per cent in 2013.

• We expect the cyclically adjusted current budget to be in surplus in 2016–17.

NIESR's world economy forecast, August 2012

NIESR's quarterly forecast for the world economy is published today. Highlights:

• Concurrent slowdown in every major economic region: world growth to slow to 3.3 per cent this year and 3.7 per cent next year.
• All major countries opt for the same policies of near zero interest rates and fiscal tightening.
• European countries face remarkably divergent growth paths next year: Germany above trend growth and Southern Europe in deep recession. Tensions will heighten further.
• World demand below potential output growth means rising unemployment – in some countries even higher than seen in the Great Depression.