Good morning from New Economy Brief.
Public opinion on economic policy drives so much of our political debate - but that debate is often based on very little information. Polling sometimes gives us glimpses of what the public think about particular economic policy questions, but rarely lifts the lid on their beliefs on the economy as a whole.
This week New Economy Brief explores a recent study that tests how public opinion changes when people are given more information, and asks what conclusions we can draw about broader public opinion and media debates on the economy.
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Public opinion on the economy is elusive but fundamentally important, because more than any other issue it drives voting behaviour. Levels of economic literacy are low in the UK, and the media debate on economics has been criticised as inaccurate and misleading, while the public’s preferences (as represented in polling) are often confusing and contradictory.
But what would happen if there was more time to explain the arguments and debate the economy with non-’experts’? A new report from Kings College London, the Citizens’ Economic Council on the Cost of Living (CEC), does just that. It explores people’s opinions on fiscal policy and solutions to the cost of living crisis when exposing them to different arguments, giving them accurate, reliable information and the time to deliberate. Most participants indicated that “their views had changed considerably” when given these resources.
Deliberative policy making. Citizens’ assemblies or juries are becoming more common around the world. As trust in politicians and economic ‘experts’ declines, these processes attempt to rebuild participation in the policymaking process. Permanent examples exist in Paris, London, Belgium, Scotland and Ireland.
Important in times of crises. These processes have high public support and provide useful focus group evidence for gauging public understanding, which is particularly important in times of crises when bold thinking is needed. But public support and confidence are vital, particularly where large interventions can benefit or harm particular groups relative to others. This report provided participants with presentations from experts on important issues such as spending, tax, public investment, debt and fiscal rules, and gave them the time to deliberate the distributional consequences of different responses to the cost of living crisis.
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Several of the report’s findings relate to this subject. They provide qualitative evidence for similar findings about voters’ priorities by the Stop the Squeeze campaign, and claims by pollsters like John Curtice that the public is becoming more supportive of income support for working age people.
Support should prioritise the poorest. Participants “consistently emphasised” the need to prioritise the most vulnerable households with spending to support people through crises. They favoured a policy package that offered more help through the benefits system, even if this meant reducing support for energy bills across all households.
Tax excess profits. The participants supported imposing windfall taxes on companies making substantial profits from high energy prices. However, when considering excess profit taxes in a broader context, they were more cautious, wanting to ensure that taxes did not discourage private investment and that smaller businesses faced lower effective tax rates than larger ones.
Make the wealthy pay a fairer share. The participants preferred more progressive taxes and focused more on raising revenue from the wealthiest, including through wealth taxes, than on sharing the burden more evenly among all citizens. They wanted work to be rewarded as far as possible, and supported increasing the personal tax allowance for people on low incomes.
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The findings also support more quantitative evidence on the changing attitudes of the public towards state intervention, exhibiting tolerance towards higher levels of spending and government debt. The participants gave interesting responses for what counts as productive uses of borrowing.
Preparation for the ‘next crisis’. There was a “strong and widely shared sense” that the government should be capable of thinking and planning “far beyond the electoral cycle” to improve future resilience. Participants were particularly focused on themes arguably similar to Labour’s ‘securonomics’ or US Treasury Secretary Janet Yellen’s ‘modern supply-side economics’: “investing directly in the economy to build resilience – both at a household and national level – against future crises and shocks, whether in energy markets, financial markets, national security, or elsewhere.”
Debt and deficit reduction targets should not stifle public investment. Following discussions and the presentation of evidence on the economics of public deficits, participants became more accepting of the idea of public investment funded through debt. They endorsed investment in areas such as housebuilding, green initiatives, business loans, transportation improvements, and retraining, particularly when these initiatives aimed to benefit UK regions and communities with lower economic productivity and opportunity. While acknowledging various factors in setting public investment levels, participants ultimately considered fiscal constraints, such as deficit and debt targets, to be less crucial than they had been led to believe by politicians and media coverage.
“Economic policy is often seen as too complex for non-specialists, but the CEC demonstrated that, when given high quality information, realistic scenarios and time to discuss and ask questions, citizens can provide unique insights and advice on difficult economic policy issues.” Beyond the idea of using citizen's juries more widely, what can this work tell us about public opinion on economic policy? Plainly it is not possible to give all citizens the kind of detailed contextual information that the people in this study got, but that does not mean there is nothing we can learn from it.
Economic debates in the media. One lesson is how important the media are in setting economic policy debates in context. The report concludes: “Media organisations should make efforts to improve coverage by making better use of economics specialists, including a wider range of economic perspectives, and contextualising facts and figures better.” These findings support key conclusions of the BBC’s Impartiality Review on fiscal policy, which argued that BBC coverage should give airtime to a more diverse range of economic perspectives. For instance, the public might change its views on how to pay for measures to tackle the cost of living crisis if given a range of options that included wealth taxes. Likewise, if reporting around Budgets or Autumn Statements made it clear that fiscal rules are self-defined political choices rather than hard economic limits, the public might start to think about government spending, investment, borrowing and debt differently. If the BBC and other media organisations were to hold true to these standards, perhaps we would see a significant shift in public attitudes on key economic policy questions.
Activating latent preferences. The second conclusion is on the substance. It is clear that the public have latent views on issues such as tax and spending that are considerably more progressive than the current debate implies. This is hugely significant. Those looking to argue for these policies, be they campaigners, think tankers, or politicians, should be seeking ways to activate those latent preferences, rather than using language that narrows the debate and reinforces the current dominant framings (check out the Framing the Economy project for more on “how to win the case for a better system”).
Global warming in the pipeline. The authors of a new academic study on global warming have called for urgent action including the development of “abundant, affordable, dispatchable clean energy”, alongside East-West cooperation to accommodate developing world needs. They think it is now too late to solve the climate crisis just by cutting emissions, arguing that some kind of geoengineering - perhaps by adding tiny particles to the atmosphere to reflect more sunlight back into space - is now unavoidable. The study finds that warming will exceed 1.5°C in the 2020s and reach 2°C before 2050 (useful summary here).
Local action on clean air. Local authority powers to address air pollution are often unclear or hard to implement, argues a new report by the Institute for Public Policy Research (IPPR). It finds that over 70 per cent of councillors feel they are not getting enough support from national government to improve air quality. The IPPR recommends that both national and local governments should outline credible plans to reach ambitious air quality targets that are aligned with WHO guidelines, as well as greater fiscal devolution to help local leadership achieve their goals.
Closing tax loopholes could raise over £7 billion a year. New research by Tax Justice UK finds that closing five “unfair” tax loopholes could raise £7 billion a year to be invested in public services. It argues that ending fossil fuel subsidies for oil and gas companies could raise £4.4 billion a year alone. Ending classic cars’ exemption from vehicle excise duty could add £130 million more a year to that, and ending video games tax relief another £197 million Meanwhile closing loopholes around capital gains and inheritance tax could bring in an annual £1.1 billion and £1.7 billion respectively.
Reforming business rates. The UK’s business rates system is not fit for purpose, argues a new report by the New Economics Foundation (NEF). The think tank proposes replacing business rates with a two-tier tax on land and property, which it argues would lead to all regions except London and the south-east paying less tax, as well as giving local authorities more control, increasing economic efficiency and making business taxation more progressive.
The Environment Act. The Environment Act, which passed in November 2021, “has yet to deliver any tangible environmental improvements”, argues Green Alliance. Action on deforestation (or lack of it) is of particular concern, with the authors pointing out that despite the Act’s goal of removing commodities produced by illegal deforestation from the UK supply chain, the government has not even settled on the products that would be outlawed or published the secondary legislation needed to activate the new scheme.
Measuring what matters. “It is essential to look beyond debt and deficits,” argues the FT’s Martin Wolf in his latest column, arguing that using broader measures such as Public Sector Net Worth could give a more accurate view of the public finances. Wolf argues that financial survival is not an end in itself for government, and that a narrow view of fiscal rules has led to poor long-term choices. He contends that “Underinvesting, as both the state and the UK as a whole have been doing for far too long, is terrible stewardship.”
