Surveys
Unravelling the Chaos: Evaluating the UK Tax Regime
The September 2023 CfM survey asked the members of its UK panel to assess the effect of tax reform on the UK’s growth over a 5-year horizon. The panel was also asked to identify which tax was in the greatest need for reform. Most panellists think tax reform will positively impact growth in the UK in the near future, with only a small fraction believing that it is unlikely to affect growth significantly. Almost all of the panel believes that all taxes are in dire need of reform, with some panel members highlighting the need to reform personal income taxes in particular.
Balancing Act: Disinflation and Recession
The July-August 2023 CfM survey asked the members of its UK panel to predict whether the Bank of England could bring inflation down to its 2% target by the end of 2024 without inducing a recession. The panel was also asked whether a recession was a price worth paying to bring inflation down to its target. Most panelists think that the UK is headed for a recession in the next 18 months as the Bank of England tightens monetary policy further. The majority of the panel also expresses its support for the Bank of England to do “what it must” to bring inflation under control. A small fraction of the panel remains opposed to further interest rate hikes due to already-high interest rates and the detrimental impact that further increases could have on households.
Artificial Intelligence and the Economy
The May 2023 CfM-CEPR survey asked the members of its European panel to predict the impact of Artificial Intelligence (AI) on global economic growth and unemployment rates in high-income countries over the upcoming decade. Most panellists think that AI is likely to boost global growth to 4-6% per annum (relative to an average of 4% over the past few decades). A small fraction believes that AI is unlikely to affect growth rates. Most of the panel also believes that AI is unlikely to affect employment rates in high-income countries. The remainder is split between predicting an increase and a decrease in unemployment rates. Notably, most panellists indicate a great degree of uncertainty regarding their predictions, because AI is still in its infancy.
Causes for Weak Long-Run UK Growth
The March 2023 CfM-CEPR survey asked the members of its UK panel to identify the most important constraint on UK potential output in 2023. Most panellists think that Brexit remains the primary drag on the UK’s potential output this year. A small fraction cites poor labour force participation as a major constraint. Several panellists suggest public investments and R&D subsidies as a solution to boost UK GDP in the medium term. Most panellists believe a combination of policies would be the most effective way to achieve this objective.
Prospects for Euro Area Inflation in 2023
The February 2023 CfM-CEPR survey asked the members of its European panel whether inflation has peaked in the Euro Area and its implications for ECB policy. A large majority of 74% of the panel thinks that inflation has already passed its peak, but half the panel thinks the ECB’s rate will need to rise to above the 3.5% peak currently forecast by market participants to support the rate of inflation reduction. Consistent with this, more than a third of the panel thinks that the ECB’s current trajectory will have interest rates too low to curb inflation