The London Business School with Gower Publishing

Last year the Chancellor followed "the path of prudence and caution", cutting taxes by £4bn and budgeting for a public sector surplus of £3bn. This year - rather more compellingly - he is travelling the same route. Against the background of a record current account deficit and rising inflation, Mr. Lawson has tightened fiscal policy, cutting taxes in 1989–90 by nearly £2bn - less than is needed to offset real fiscal drag. His main priority, reaffirmed in the Budget speech, is to tackle inflation and, to this end, he chose not to revalorize excise duties. This was reinforced by a reduction in national insurance contributions, which not only benefits the low paid in relative terms, but also sharpens the incentive to supply labour at the bottom end of the wage spectrum. But this reform of national insurance is not cheap. Even though it is not practicable to implement the changes until October, the cost in 1989–90 is estimated at £1bn, rising to £2.8bn in 1990–1. This is equivalent, in PSDR terms, to a 2 per cent cut in the basic rate of income tax arid, in our post-Budget forecast, precludes further tax cuts in 1990. Unless there is an unexpectedly large rebound in personal savings, the Chancellor is likely to find himself in his present position in a year's time: presiding over a large budget surplus but unable to reduce it significantly for fear of rekindling inflation or aggravating the current account deficit. Simply writing declining numbers for the PSDR into the MTFS offers no genuine guidance on medium-term fiscal policy and may even be positively misleading to financial markets.     

Economic Outlook 1991–1995: The London Business School with Gower Publishing: Forecast Release: THE CHANCELLOR'S ECONOMIC ADVICE

Within the last month the Chancellor has made two important speeches on macroeconomic policy. The first, to Surrey businessmen in June, pledged the UK to the French route to a ‘virtuous circle of low inflation, rising competitiveness and increasing market share’; the second, in July to the European Policy Forum, vigorously defended his present policy against the alternatives, which he dismissed as ‘illusory or destined to fail’, of devaluation or cutting interest rates. On both occasions Mr. Lamont placed the permanent conquest of inflation at the centre of his policy, arguing that holding sterling at its present central parity of DM 2.95 is the only way to achieve this objective. In his view the consequence of any of the alternative proposals would be ‘either higher interest rates, higher inflation, or most likely both’. In this Forecast Release we consider these claims and the economic advice on which it is based. On the latter we would surmise that the thrust of the advice which Mr. Lamont is receiving is that he has the opportunity to deliver a sustainably low inflation rate and that this requires a stable pound within the ERM. The alternatives involve a sterling devaluation which, no matter how obtained, would obstruct the goal of permanently low inflation in return for only transient benefits on output and unemployment. But the price of defeating inflation has been high and is not yet fully paid. Moreover the goalposts have been moved: to reach the French position on competitiveness, which underpins their gains in market share and which has taken the best part of a deeade to achieve, requires a still better inflation performance on the part of the UK and while this is being achieved, adjustment costs will persist. It is partly in defence of his own policies and partly in an attempt to moderate the already-high adjustment costs that Mr. Lamont has adopted a more combative stance. His advice is that to compete with Europe, we cannot award ourselves pay increases far in excess of European levels, indeed we need a period of below-average pay rises.     

The London Business School with Gower Publishing

The knives are out for the Chancellor whose opinion poll ratings are at a record low level. He is being personally blamed for the Conservatives' poor showing in this month's elections and, according to newspaper reports, is certain to lose his job in a Cabinet reshuffle, probably in the summer. Mr. Lamont has presided over the UK economy over a difficult period - though many of his policies and problems were inherited from his predecessor (Mr. Major) - and arguably he should have resigned last September following the failure of the ERM policy and the huge cost of intervention. Since then Mr. Lamont, probably on the advice of his Treasury officials, has followed a determinedly non-populist approach, notably on public spending last autumn, interest rate cuts earlier in the year and tax increases in the Budget. But, as economic recovery becomes better established, and the focus turns to the structural problems of the British economy, it is evident that some very tough choices will have to be made. Over the medium term the balance of payments and public sector deficits are going to have to be tackled which means devoting resources in the first place to exports and investment, not to consumption. This means no more interest rate cuts, higher taxes and public spending cuts, which Mr. Lamont has already shown he is willing to implement, and requires a Chancellor who is able to stand up to the more populist and erratic approach of the Prime Minister. The danger would be that a new Chancellor, seeking to court popularity in a way that Mr. Lamont has not, opts for the easy alternative in the short run - to the longer-term detriment of the economy. Almost by definition, certainly in the absence of either an independent Bank of England or an external exchange rate constraint, only the Treasury can take the tough line and so the Chancellor has to be unpopular - Nigel Lawson's best received Budget, that of 1988, is now universally damned. Mr. Lamont may be about to be buried but he should be praised for taking the non-populist line.     

Will Labour’s Economic Programme Work?

If Labour is elected to government on 1 May, it will inherit the lowest inflation of any incoming government over the last fifty years but the highest unemployment. At the same time, public borrowing is running at an unsustainable high level. In this article, Andrew Sentance examines Labour's plans to expand employment while reducing public borrowing and containing inflation. He argues that Labour's economic programme could work but a number of pitfalls need to be avoided. Monetary policy will need to be tightened after the Election and the fiscal squeeze implied by Conservative spending plans maintained – if necessary through higher taxes. The benefits from Labour's employment policies could also be undermined by a high minimum wage, particularly if applied to young workers.     

中国梦想篇

2001年那个难忘的日子,何振梁做着最后的陈述:今天无论你们选择哪一个城市,你们都决定着历史,但是因为你们选择了这座城市,你们将创造历史。何老后来说,当年被称为‘东亚病夫’的时候,单纯的体育梦是不可能实现我们国家‘国富民强’梦的。我们必须要在实现‘中国梦’的过程中才能够实现体育的梦想,而体育反过来又会为实现我们的‘中国梦’超到积极的作用。1917年五四运动前两年,一个署名为二十八画生的青年在《新青年》上写道,体育之效可以强筋骨,增感情,强意志,文明其精神,野蛮其体魄。北京2008奥运会将承载中国什么样的体育梦想、经济梦想、社会梦想、文化梦想、文明梦想、民族自信心以及国家精神?     

Do enlarged fiscal deficits cause inflation? The historical record

We survey the historical record for two centuries on the connection between expansionary fiscal policy and inflation. The relationship holds in wartime when fiscally stressed governments resorted to the inflation tax. In two peacetime episodes in the early twentieth century, bond‐financed fiscal deficits, unbacked by future taxes, may have contributed to inflation. Fiscal influence on monetary policy was important in the Great Inflation 1965–1983. Expansionary monetary and fiscal policy did not lead to inflation in the Global Financial Crisis of 2007–08 but, by contrast, the fiscal and monetary response to the COVID‐19 pandemic may involve risks of fiscal dominance and future inflation.     

The First Unified Budget What Should Mr. Clarke Do?

Mr. Clarke has the distinction of presenting the first Unified Budget, an innovation introduced by his predecessor. He does so against a subdued inflation outlook and a recovery from recession that has been proceeding since the first half of last year. But he is also aware that there are risks to this favourable outlook: European recession may slow growth, and there is the worry that underlying inflation may breach the Government's 4 per cent ceiling. III this Viewpoint, we argue that the Chancellor should go further that his predecessor in curbing public borrowing, aiming for a reduction of sonic £4-5bn; this fiscal contraction could be accompanied by a further 0.5 per cent reduction in interest rates, or more if the recovery shows signs of faltering. A rebalancing of monetary and fiscal policy in this way reduces the risks associated with a high level of public borrowing, can help in reducing the excessive level of consumption (private and public) in the UK economy, and offers the best means of maintaining a competitive exchange rate without inflation. A curious feature of the first Unified Budget is that, having moved tax decisions to the autumn, the Chancellor appears to have ruled out further government spending cuts beyond those agreed by the Cabinet before the summer: with more favourable inflation arid the public sector pay limit, there would seem to be scope for a further reduction in the Control Total. On the revenue side, the Chancellor should seek to raise revenues in such a way that does not adversely affect incentives. Here he has several options: to extend the VAT net; to eliminate income tax allowances or reduce them to the 20p rate of tax; or to introduce new user charges. There is also the opportunity, one year on from the UK's exit from the ERM, to restate the basis for a sustainable macroeconomic framework. This should include a rebalancing of monetary and fiscal policy, and a move to enhance the powers of the Bank of England but with parliamentary accountability.     

THE BUDGET

Mr Clarke's first unified budget is politically highly astute. He has skilfully defused the household fuel VAT row. As we predicted in the October Economic Outlook, he has taken advantage of lower inflation and the public pay freeze to cut public spending with tough curbs on social security. This, together with the absence of measures against the pensions industry, has pleased the markets. But it will prove hard, though not impossible, to hit the new public spending targets beyond next year, particularly if inflation picks up. The further reduction in mortgage tax relief, the modest extension of the tax base, the action on tax avoidance and the introduction of road charges all make good economic sense, though the absence of measures to give the Bank of England more freedom for manoeuvre in monetary policy is disappointing. There is still the risk that the large tax increases on consumers bequeathed by Mr Lamont will slow recovery in 1994, but overall this is a budget that is good for the economy and good for Mr Clarke. It paves the way for further interest rate cuts of ½-1%. In this forecast release we consider the details of the Budget, dissect the Treasury forecast, and consider the plausibility of the spending targets, especially in later years.     

电动车的关键战场

这是中国汽车工业摆脱内燃机时代对外资高度依赖的绝地反击吗?在冗长的产业链链条中,又有哪些力量在争夺未来?     

THE 1992 BUDGET FOUR LEGS GOOD; TWO LEGS BETTER

In framing his Budget, the Chancellor, Mr. Lamont, sought to balance two mutually exclusive goals: the political imperative of establishing the Conservatives as the party of low taxation on the one hand; the deterioration in the financial position of the public sector on the other. Inevitably the Budget fell between these two stools. The net cut in taxes, though cleverly angled towards the low paid, was a modest £2.2bn, 0.4 per cent of GDP, which is unlikely to 'buy' many votes on 9 April. This may largely free the Government of the charge of trying to bribe the electorate, yet it still leaves the PSBR at £28bn in the coming financial year, £36bn excluding privatisation receipts, which is equivalent to 6 per cent of nominal GDP. Over the medium term Mr. Lamont reaffirmed the Government's commitment to a balanced budget, though on the Treasury projections this is not achieved by 19967, despite the assumption that growth averages 3.5 per cent a year from 1993 onwards. On our calculations, a return to budget balance is unobtainable even on the Treasury's optimistic growth projections without a move to tighter fiscal policy. The Conservatives' maxim that 'budget balance is good; budget deficits are bad' may not have been formally jettisoned, but it is in the process of being re-written as 'budget balance is good; budget deficits are better, as long as they are prudent'.     

Note on ‘Loss of monetary discretion in a simple dynamic policy game’

Jensen (1994a) finds that loss of monetary discretion leads to lower welfare. However, by extending his model we show that if real base money holdings are relatively low, as is likely to be the case for modern economics, a zero-inflation rule may well be preferable to monetary discretion. If the emphasis on achieving the output and public spending targets falls, a zero-inflation rule is more likely to be preferred. The increased support for binding policy rules thus conforms with a less tolerant attitude towards inflation.     

英孚：布局中国的辩证关系

染成黄绿色的头发一根一根地树立着,然而一身中规中矩的西服却非常笔挺,他就是英孚教育（English First）和中国区总裁比尔·费舍尔（Bill Fisher）。比尔长相酷似北欧人,但却是地地道道的美国人,比尔认为他对英孚的管理之道跟他的穿着打扮非常类似——中规中矩中坚持独立个性……     

What Remains of Thatcherism?

Mrs. Thatcher came to power in 1979 with a mission - to reverse years of economic decline in Britain. This, it was argued, required major reforms in microeconomic policy and a reduction in the role and size of the state. Macroeconomic policy was seen as playing a facilitating rather than a direct role. Above all a fundamental change in the attitudes of the British people was required. In this Viewpoint we examine the record of the Thatcher government and ask how much of this philosophy is likely to survive under the government of John Major. Our verdict is that, in key areas such as the community charge, health and education, Mrs. Thatcher failed to wean the British people off the welfare state - we prefer public provision out of general taxation to a direct charge for services consumed. It is already evident that Mr. Major's government acknowledges this and is backing away from the harshest aspects of Mrs. Thatcher's social policies. In macroeconomics the primacy of the battle against inflation has generally been accepted, though the chosen policy - the EMS rather than independent monetary policy - is not Mrs. Thatcher's. We believe that the present approach offers the greater hope for a lasting reduction in inflation, but it is an irony that this was the area which ultimately brought Mrs. Thatcher down - Britain accepted her end but not her means. On industrial policy there are fears, which were first raised by Sir James Ball in his Viewpoint of October 1989 and which were expressed forcibly when Mi. Heseltine first challenged Mrs. Thatcher, that the new government will revert to a more interventionist approach. It is too early to know whether these fears are justified, though it is clear that any backsliding in this area will be the test of how much of Thatcherism survives into the 1990s.     

Monetary Policy and the Stock Market: Theory and Empirical Evidence

This paper gives a comprehensive review of the literature on the interaction between real stock returns, inflation, and money growth, with a special emphasis on the role of monetary policy. This is an area of research that has interested monetary and financial economists for a long time. Monetary economists have been interested in the question whether money has any effect on real stock prices, while financial economists have investigated whether equity is a good hedge against inflation. Empirical studies show that money can be helpful in predicting future stock returns. Empirical evidence also suggest that equity is not a good hedge against inflation in the short run but may be so in the long run. The short-run negative relation between stock returns and inflation can easily be explained by theoretical models. If the central bank conducts a countercyclical monetary policy this will result in a negative relation between inflation and stock returns, while if it conducts a procyclical policy we could observe a positive relation. According to both theoretical and empirical studies investors receive an inflation risk premium for holding equity.     

Reforming or Transforming the Federal Tax System: (A Review Essay)

A bstract . Several proposals to reform the federal income tax system are under active consideration. Professor Richard W. Lindholm has proposed instead that we abolish the individual and corporate income taxes and the estate and gift taxes. To replace the lost revenue he proposes a flat 15 per cent value added tax and a flat 2 per cent net wealth tax. He posits five goals for successful tax reform and discusses his proposed system in terms of them. He finds his system would be simpler and less disruptive of markets than even a simplified income tax structure.     

浅议我国现行个人所得税制改革

个人所得税作为调节居民收入分配的一个重要税种,在我国经济生活中起着至关重要的作用。个税调整直接关系百姓钱袋子,在通胀形势下成为关注热点。随着我国经济的增长,居民可支配收入也在逐年增多,但是作为调节贫富收入差距的"个人所得税"这一税收杠杆却滞后于我们经济的变化,这些问题不仅严重影响了税收调节经济的功能,而且对社会稳定也极为不利。本文在阐明了我国个人所得税制改革中存在的相关问题后,有针对性的提出了相关学者的政策建议。     

The Narrow Band Option for Mr. Lamont

The dilemma facing Mr. Lamont as he prepares his first Budget is the conflict between the need to keep interest rates high to maintain the commitment to sterling's ERM band and the wish to reduce interest rates to ease the severe recession in the domestic economy. In large part, this conflict is intrinsic to the government's aim to bring down UK inflation to German levels through membership of the ERM: the process of reducing inflation is always painful and costly in terms of lost output and higher unemployment. But the dilemma is made worse by the uncertainties over future policy direction, reflected in the differential between UK and German interest rates. German monetary policy is set to remain tight to hold in check the inflationary pressures that might otherwise arise from German unification. Against this background success in reducing UK interest rates will depend on the government's success in establishing the credibility of its anti-inflation policy and of its ERM commitment. An expansionary Budget aimed at easing the recession would undermine this credibility, and remove the scope for additional interest rate reductions. An abandonment of the ERM commitment would signal the accommodation of inflation, and condemn the UK to continuing high inflation and interest rates. We argue in this Viewpoint that the best course open to the Chancellor is to adopt a broadly neutral Budget stance, and to strengthen the ERM commitment by moving to a narrow band for sterling within the ERM. This should enable the Chancellor to reduce UK interest rates again at around the time of the Budget and lay the basis for further subsequent cuts.     

BARGAINING FOR LOWER INFLATION

Industrialists are concerned about the high level of interest rates. The government is refusing to take deliberate steps to cut them, particularly at a time when the exchange rate has been falling in response to events in oil markets. However, the government has suggested that wage moderation offers the best chance of a fall in interest rates. Can this be interpreted as a promise of a reward for good behaviour? The idea of a policy bargain, whereby the authorities promise some kind of fiscal or monetary stimulus as a reward for moderation in wage settlements, is not new. An explicit bargain of this type was offered by Mr Healey in 1976 and again in 1977. In each year he offered tax cuts contingent on the negotiation of a new pay policy. Some have interpreted Mr. Lawson's comments at the recent NEDC meeting as offering a similar type of bargain on interest rates. As far as we can tell, that interpretation is incorrect; there are however interesting and important questions about whether policy should respond to lower inflation. We argue that, in general, lower inflation will itself produce favourable automatic responses for real demand within a nominal policy framework. The question of the effects of wage moderation is rather more complex. We believe that no policy adjustment is necessary. This also appears to be the government's view.     

The future of fund raising: developments in the 1980s

Those institutions that survive the "combined onslaught" of inflation, taxes and other stubborn foes that will continue to beset them in the decade to come can only be strengthened by their tribulations, the author claims. With the aid of his "crystal ball", he views what the 1980s have in store for philanthropy.