Author Archives: Tim Leunig

This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. So far the series has covered bank bailouts, bank lending, fiscal policy, interest rates and tax policy. Today’s final part looks to the long term future.

Getting the long term picture right

In its panic and determination to “do something now” government must not forget its role in securing the long-term underpinnings of the economy. There are three areas in which Britain has serious problems.

Our education system fails …

This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. So far the series has covered bank bailouts, bank lending, fiscal policy and interest rates.

Tax policy

The rapid deterioration in the fiscal position should worry us all. The British tax system is much more pro-cyclical than people previously thought, so that tax revenues fall dramatically even when the downturn is relatively small. (Remember, the economy has only just started to decline, so the fall in tax revenue so far …

This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. So far the series has covered bank bailouts, bank lending and fiscal policy.

Interest rates and the Bank of England

The Bank of England’s monetary policy committee has done well. They did not rush to cut interest rates when inflation still looked to be a real threat (don’t forget that this summer saw the highest level of inflation for a decade). But as soon as there was a serious prospect of …

This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. So far the series has covered bank bailouts and bank lending.

Fiscal policy

Much has been written about the need for a fiscal boost. The debate has been poor, with politicians and the media muddling up underfunded tax cuts, tax cuts funded by spending cuts, and tax cuts funded by rises in other taxes. The last two have no impact in this context, and will not be considered.

Underfunded tax cuts, or unfunded …

This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next. Yesterday was bank bailouts, and today…

Bank lending

It is important not to resume borrowing levels of two years ago. Indeed, we can calculate the optimal level of mortgage lending. Net lending should equal the value of new houses built, minus deposits on those houses, plus the same for houses bought by newly-formed households, and those moving to larger houses, minus regular capital repayments on the existing mortgage stock. Housebuilding rates are low …

This week Liberal Democrat Voice is running a series of articles from Tim Leunig about the economy – how we got here and what we should do next.

Bank bailouts

The economic downturn was precipitated by financial problems. This is a sign of a successful financial sector: they are there to bear risks other people do not want to bear, and are correspondingly prone to crises from time to time. Since the underlying rationale of a bank is to borrow short and lend long, the threat of bank runs will always be with us.

Banks in Britain needed government assistance to distinctive reasons. …