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‘After the Virus’ is the first detailed post-crisis blueprint for how to renew growth across every part of the UK.
- Former Chancellor warns that the crisis is likely to exacerbate the regional disparities the Government committed to tackling.
- Report stresses vital importance of Bank of England independence but argues that the Government and the Bank should consider a shift in its remit from targeting inflation to nominal GDP, in order to better deliver sustained growth.
Sajid Javid MP, the former Chancellor, has joined forces with the Centre for Policy Studies – the leading centre-right think tank – to set out a series of recommendations to Government on how to kickstart the economy and minimise the long-term damage from the coronavirus crisis.
The report, ‘After the Virus’, is the first in a major series of CPS papers on the economic recovery, under the banner of ‘Going for Growth’.
The paper argues that it is now increasingly unlikely that we will see a V-shaped recovery. The impact of the crisis, the need to maintain social distancing, and the hit to consumer and business confidence, represent formidable headwinds to renewed economic growth.
In ‘After the Virus’, Javid and the CPS say that the Government’s immediate priority should be to prioritise growth, rather than derail the recovery with tax rises or spending cuts. They suggest a new fiscal rule in which the Government brings the current budget into balance within three years, but only when a stable recovery has been achieved.
The report argues that any recovery must be based on sound money, a dynamic private sector and low taxes, as well as a renewed commitment to invest heavily in infrastructure to drive growth across the country, and prevent the coronavirus exacerbating regional disparities and stagnant productivity.
The report contains 63 recommendations. Key proposals include:
- Significantly reducing the cost of hiring by cutting employer’s National Insurance
- Bringing forward and enhancing plans for major investment in infrastructure and left-behind regions, both to increase economic activity now and to boost long-term productivity
- A review of the UK tax system, aimed at delivering a moderate increase in revenue over the medium-term through improved incentives and higher growth
- Encouraging businesses to invest in their premises and social distancing measures by allowing improvements to be disregarded for the purposes of business rates valuation
- A council tax revaluation, with reviews every three years, reforming bands and rates to make them fairer
- Establishing a British Infrastructure Bank, based outside the South East, with seed capital to fund infrastructure across UK regions and leverage-in private investment
- Major reforms to planning rules, including fast-tracking reclassification of Green Belt, and a new generation of development corporations.
- A revitalised devolution agenda to level-up the UK, with more City Deals and increasing the powers and capacity of devolved authorities to invest for growth
- Pushing ahead with free trade agreements and new measures to attract talent and investment from across the globe
- A visa scheme to automatically allow recent graduates from the top 50 academic institutions globally into the UK for work and research
- Switching away from pension tax relief based on marginal rates to a flat bonus paid on contributions, regardless of your tax code
- Asking the Government and Bank of England to comprehensively review the Bank’s monetary policy framework and consider switching to nominal GDP targeting
‘After the Virus’ looks at the pressing problems resulting from the COVID-19 pandemic, but also considers the underlying issues the UK was already facing pre-crisis. These include increasing productivity, levelling up the regions of the UK, boosting business investment, and achieving net zero greenhouse gas emissions.
