Thursday, 6 August 2009

Britain is doing very well - here's why

Paul Krugman has been cheerleading for Britain for a while. I'm not sure I agree with him that the pound is cheap, but it's good to see we that some of our signs of robustness are visible from outside.

Why is our economic performance so good? This is one - charming - theory.


Don said...


Is there any more information about the effect of the VAT decrease?

Don the libertarian Democrat

Leigh Caldwell said...

Hi Don

I haven't heard anything more since April, but the view then (from the CEBR) was that it looked likely to provide a boost of £8-9 billion (about 1.5%) to retail spending.

My own suspicion is that, while it may have had a small direct impact on consumer buying decisions, its main importance was similar to that of automatic countercyclical stabilisers. It simply leaves more money in people's pockets, enabling them to consume more or to increase their savings, either of which will assist the recovery.

Don said...

Thanks Leigh,