Economics Observatory | Insights on the UK and global economy

Which taxes are best and worst for growth?

Tax affects economic growth by reducing consumer spending and lowering incentives to invest. But different fiscal policies have variable overall economic effects, with taxes on income better than those levied on corporate profits in terms of their wider impact on GDP.

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News

Growth matters

Ahead of the UK’s Budget, we look at the insights from our series of articles on economic growth. Unlocking the country’s economic potential is vital to boost incomes and protect jobs, as well as paying for the public services that people rely on.

DATA HUB

November budget: taxes set to rise

Taxes are set to rise in the UK.

Today’s #ChartOfTheWeek shows a stark flaw in the system — a clear spike in taxpayers reporting incomes just below £100k as people deliberately avoid crossing into the high-tax zone where marginal tax rates jump steeply.

Click here to read Jack Pepin-Hall on why some workers face marginal tax rates over 60%.

Prices & interest rates

Can we explain why inflation in the UK is higher than in the Euro Area?

Swati Dhingra of the Bank of England’s Monetary Policy Committee argues that UK inflation is more similar to Europe than it seems, and therefore rate cuts are possible without threatening the return of inflation to target.

MAGAZINE

Read the latest edition of our magazine here

The UK’s Industrial Strategy targets growth in eight high-potential sectors. The UK’s position relative to comparator countries varies in each area, and there is room to accelerate growth in most cases. Across the board, continued investment in skills and innovation is needed to grasp the economic opportunities.

Nations, regions & cities

How productive is the West of England?

The West of England has a diverse economy, including rural areas, services-based jobs and advanced manufacturing hubs. Investment in infrastructure, skills and research and development (R&D) could help to boost the region’s productivity.

Science, technology & innovation

The rise of artificial intelligence: What next for the UK economy?

Over the past few years, artificial intelligence has exploded in popularity, power and potential. How this continuing trend affects the UK economy will depend on how both policy-makers and domestic firms respond to the development of new digital technologies.

Business, big & small

How has digitalisation changed the economics of the creative industries?

Digital technologies have had a profound effect on the production and consumption of creative goods and services – from archives to video games. They have also challenged how economists analyse the creative industries and beyond, with the growing importance of platforms and network effects.

Public spending, taxes & debt

Why do some people in the UK face marginal tax rates of over 60%?

Various adjustments to Britain’s tax and benefit system have created sharp spikes in marginal tax rates. Some families take home less than 40p of each extra pound they earn, blunting incentives to work or take promotions.

Health, physical & mental

Does getting richer make people happier?

The relationship between economic growth and happiness is not as straightforward as it first appears. While higher income is associated with greater wellbeing, other factors like healthcare and friendship are important too, especially in richer countries.

Prices & interest rates

#economicsfest: What does food tell us about the economy?

The cost of living crisis has made clear the centrality of food in household budgets and people’s broader wellbeing. The nutritional quality of what we eat, where it’s grown and how much we pay for it are all crucial – not just for human health but the health of the planet.

Lessons from history

#economicsfest: How can lessons from the past help to improve our economy?

The UK faces major economic, social and environmental challenges, which include fixing ailing productivity, boosting social mobility and meeting climate targets. Each will require learning lessons from the country’s past and implementing clear and focused policy.

News

The price of security

War and security come at a price. Global defence spending is rising in response to geopolitical threats – from Russia’s aggression in Europe to conflict in the Middle East. Governments face difficult choices as a result: balancing the need for security with other priorities and targeting defence investment to foster innovation and growth without draining public finances.

Trade & supply chains

Global defence spending: What next for European military procurement?

With its fragmented production process, European defence procurement is inefficient and uncompetitive in comparison to the United States. A new approach, prioritising cross-country collaborations, could improve things, but would not be without its own challenges.

Productivity & growth

Can defence spending boost growth and productivity in the UK?

The UK is raising defence spending to bolster national security. But unless this shift supports defence-related research, without sacrificing public funds for innovation in health, science and education, the result could be slower productivity growth, not faster.

All Answers