Expert comment: Spring Budget 2023

“Both demand-pull (e.g., COVID support) and cost-push (e.g., Brexit, Russian-Ukraine war, etc.) have caused the current suffering from high inflation. In this situation, any further demand-pull policies (e.g., income tax reduction, salary increases, etc.) without significantly impacting economic growth would cause further inflation. Rather, reducing cost push policies, such as increasing cost and production efficiency by reducing disguise unemployment and increasing skilled labour supply, will enhance economic growth and reduce inflation.

“Jeremy Hunt's Spring Budget should be welcomed, as it focuses on policies regarding supply-side enhancements. Lowering business tax, removing barriers that stop people who want to from working, reforming the childcare system, energy bill and fuel cost supports, and £400m of Levelling Up funding, including the creation of 12 new investment zones, are all about supply side boosting policies, which will increase the economic growth with declining inflation. Specially, childcare support will also reduce disguised unemployment, increasing the productivity of existing labour.

“However, for long-term sustainable growth, the country needs a significant investment in higher education to increase skilled labour. As we know, the NHS has a significant shortfall of doctors and nurses. This Budget did not go far enough to tackle that shortfall. Although the current unemployment rate is less than 4%, the actual rate will be much higher if we include inactive and disguised labour in the labour force. This Budget does not have any significant policy recommendations for reducing disguised unemployment.”