Wednesday, 27 March 2013

David Goodhart's British fantasy

David Goodhart's book on immigration and the UK, the British Dream, hasn't been released yet.  But on what I know (I've discussed these issues with David numerous times and he kindly asked me to read part of the draft) it will have a tremendous amount of sociologically interesting anecdote but a rather selective, at best, reading of the evidence. I suspect I will agree to a considerable extent with some of the conclusions on the broad approach to integration, while disagreeing violently with immigration policy prescriptions that I consider very poorly reasoned and economically damaging. 

[UPDATED 11pm 27/3 - SEE END]

Sunday, 24 March 2013

A Socratic dialogue with @ToryTreasury

Yesterday I spotted a tweet from @ToryTreasury, who describes him/herself as "Official CCHQ voice for all things Treasury".
Ed Miliband's spending plans he repeated today would mean £33bn more borrowing this year - driving the deficit back up to double-digits.
I tweeted back
Out of curiosity, what multiplier are you using?
I wasn't looking for an argument. I certainly wasn't endorsing (or opposing) Labour's "five point plan for jobs and growth"; in particular, as I've said numerous times (eg here), I'm not at all enthusiastic about a VAT cut in current circumstances. But NIESR's views, or my own, weren't the point at all; I was genuinely curious about ToryTreasury's methodology.

Friday, 22 March 2013

Nick Clegg's immigration speech

From Nick Clegg's speech on immigration: 
"I believe people will have more faith in our immigration system if they see that we are doing everything we can to help young British men and women into work.  To that end, the Coalition has also capped unskilled migration from outside the EU."
This is fantasy.  The Coalition has introduced absolutely no policies that "cap migration from outside the EU", since when they took office there were no economic migration routes permitting unskilled workers from outside the EU, and have not been for some time.  
Indeed, the previous government stated in 2008: 
"But we have also decided to suspend low skilled migration from outside Europe through the points based system which will provide additional protection for low paid workers."
Even this was disingenuous; there was very little to "suspend" even then.  Post 2004, and the new EU member states, what need was there for low skilled migration from outside the EU?
When I asked Mr Clegg what policies he was referring to, he said that of course all he meant was that that the Coalition had maintained the policy of the previous government, and said I was being "mischievous" in suggesting that he was being misleading. The written text is above; judge for yourself.

Politicians from all parties are always saying that we need an "open and honest"  debate about immigration. Getting your facts completely wrong doesn't help.  On policy, there's not much to say about the speech, except that it was profoundly illiberal (from an economic perspective); on this, again, there seems to be a regrettable cross-party consensus.  My outline of what a liberal, market-friendly approach that took the contribution of immigration to growth and productivity seriously is here

Thursday, 21 March 2013

We've got the deficit down by a quarter? No, a third! (updated)

The first substantive line of George Osborne's Budget Speech was:
"We’ve now cut the deficit not by a quarter, but by a third."
This might surprising to anybody who read my earlier blog here, which pointed out that the deficit had (measured on a rolling twelve- month basis) been rising, not falling, for the last year or so. Nor does it chime very well with the statement made by Robert Chote yesterday, Chair of the independent Office of Budget Responsibility, who stated that deficit reduction "appears to have stalled". How to reconcile these figures?

Thursday, 14 March 2013

Ready for Ageing: Report of the House of Lords Committee on Public Services and Demographic Change

This Committee published its Report today. For anyone interested who is interested in the future of public services and the welfare state, looking beyond the short-term debate about austerity, it is essential reading - and it is only 10 pages long, although there are extensive annexes setting out the evidence base.  

I (along with the estimable Professor Howard Glennerster at LSE) was a Specialist Advisor to the Committee. We take no responsibility for the Report's conclusions, and I don't necessarily agree with every detail, but for what it's worth I think they are broadly sensible. Below, I have picked out (verbatim) what I think are the key points; personally, if I could highlight one, it would be this passage on fairness:
"There are likely to be considerable increases in public and private spending over the next two decades on services that are particularly important to older people: healthcare, pensions and social care. This is not a bad thing; over time, an increasingly affluent society (as, on the whole, we expect to become) is likely to want to spend more on improving the lives of its citizens, and an older society is likely to want to spend more on the priorities of older people. This increased spending can only be financed by individuals directly, or through taxes, social insurance, or cuts elsewhere: it must be financed fairly.
 The welfare state has largely meant people paying in when they are young and drawing out when they are older; this should continue. But we have to be wary of shunting too many costs onto younger and future generations. In particular, the property boom has led to a very large transfer of wealth to older, better-off homeowners, which has increased housing costs substantially for younger generations. Younger generations will benefit from being part of a richer society in many ways in the future, but they will also have to service large public and personal debts and may often have poorer pensions.
It does not seem fair to expect today’s younger taxpayers—especially those not born to better-off parents—to pay more for the increased costs of an older society while asset-rich older people (and their children) are protected." 
More detail below. 

Sunday, 10 March 2013

Believing in "miracles"? Self-defeating austerity and self-financing stimulus

The Prime Minister's speech on the economy on Thursday was, leaving the policy aside, notable for some of its analytical claims.  Simon Wren-Lewis's dissection is thorough and comprehensive; Danny Blanchflower and Adam Posen have a lengthy discussion here . In particular, much has already been written about the Prime Minister's misinterpretation of the OBR's position on the impact of fiscal consolidation on growth; for a thorough explanation, see Duncan Weldon.

But I wanted to focus on another specific passage of his speech, since it seems directed at, among others, us here at NIESR, and where the Prime Minister cites the work not of the OBR but of the IFS to put the counterargument. The Prime Minister argued:
"So those who think we can afford to slow down the rate of fiscal consolidation by borrowing and spending more are jeopardising the nation’s finances. Labour’s central argument is exactly that.  They say that by borrowing more they would miraculously end up borrowing less.  Let me just say that again: they think borrowing more money would mean borrowing less.Yes, it really is as incredible as that.The Institute of Fiscal Studies has completely demolished this argument.They say that if we had stuck to Labour’s plans we would be borrowing an extra £200 billion.."

Wednesday, 6 March 2013

Immigrants and benefits

Do migrants, especially those from within the European Union, get a better deal in Britain than they would elsewhere in the EU? My article in the Guardian, here

Speaking English does matter. But almost all immigrants to the UK do.

Tonight, Ed Miliband will - again - admit that "Labour didn't get it right on immigration", in particular by failing to impose the "maximum transitional controls" on those coming here from the new EU Member States. As I've pointed out before, this ignores the fact that pretty much all the evidence about the impact of this decision is positive: the new migrants get jobs, contribute to the economy, pay taxes, don’t use many public services, and don’t take jobs from natives. Nor, as I explain in the Guardian, do they pose a significant threat to the benefit system. 

Friday, 1 March 2013

Budget 2013: time for an investment-led growth agenda

[This article originally appeared in Public Finance]

The economic history of the UK over the past 30 years can be summarised as a period of quite successful microeconomic reform, leading to relatively high productivity growth, interspersed with episodes of disastrous macroeconomic mismanagement. Unfortunately, we are living through such an episode at present.  This is the slowest recovery in the UK’s recorded economic history. NIESR  forecasts that real per capita gross domestic product, the simplest measure of how prosperous we are as a country, will not return to its 2008 peak until 2018.