The former Treasury Secretary of Britain and India, who took over the leadership of 10 Downing Street last month on a promise to rectify the fiscal mistakes of her predecessor Liz Truss’ disastrous mini-budget, has vowed to control rising inflation as a top priority and a warning of troubled ones Tax and Spending Decisions.
Even as they eye the possibility of a Free Trade Agreement (FTA) with India as a potential source of much-needed economic growth, economists agree on the magnitude of the problem.
dr Anna Valero, Senior Policy Fellow at the London School of Economics’ (LSE) Center for Economic Performance, says both current and ongoing issues are to blame for the UK’s economic woes.
She claims that Britain’s unusually weak productivity growth after the financial crisis weighed on real wages and contributed to high inflation, high interest rates and tight fiscal policy.
Inequalities are also significant in the UK and persist. Britain is now a “stagnation nation,” she says, and urgently needs a new economic plan to put it on a stronger, fairer and more sustainable growth path. Asked how a free trade deal between India and the UK could affect this situation, the expert praised Sunak’s commitment to an agreement.
Such a partnership could create economic opportunities for the UK, particularly if there is an opportunity to export services, which are the country’s key competitive advantage, to a market expected to grow rapidly.
The Russia-Ukraine conflict is believed to be the main cause of the energy problem that is currently driving up household bills in Britain. The main causes of the current disaster are a weak post-COVID recovery, the ongoing impact of Brexit uncertainty after the United Kingdom left the European Union (EU) in 2016, and years of underinvestment as a result of the austerity measures that followed the 2008 financial crisis.
according to dr George Dibb, Director of the Center for Economic Justice at the London-based Institute for Public Policy Research, said the UK economy had been experiencing low growth, underinvestment and economic inequality both within its regions and within its current crisis (IPPR ).
This has been exacerbated by the last decade of “austerity” that has involved budget cuts that have damaged average households and degraded the health and education systems that serve as the foundation of any thriving economy.
“Things were made even worse by the huge impact of the Russian invasion of Ukraine on energy prices, with the resulting cost of living crisis being provoked; and the final straw that broke the camel’s back was the Truss government’s recent mini-budget and proposed unfunded tax cuts, which undermined markets’ confidence in both UK government and the economy,” he reflects.
According to him, the continuous succession of new prime ministers and governments with frequently changing agendas has made corporate decision-making even more difficult. As the Sunak government prepares to deliver the crucial autumn budget statement next week, stability and a strategy that drives the growth agenda are urgently needed.
“There are reports that the government is planning to abolish the dividend tax allowance, but that would only be a small step in the right direction and we think it should go further and tax dividends at the same rate as income tax. Not only would this bring in billions more to support households and businesses, but it would also end the injustice of working people paying a higher tax on their income than shareholders, adds Dr. Add Dibb.