The economics of Boris Johnson
The FT's Chris Giles explains why Brexit holds the key to the new PM's tax and spending plans
Produced and edited by Jamie Han, Footage:Reuters/Bloomberg
Transcript
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And therefore, I give notice that Boris Johnson is elected as the leader of the Conservative and Unionist party.
Boris Johnson has just been elected leader of the Conservative Party. And on Wednesday, he'll become prime minister. So what does he face when he's looking at the UK economy? Well of course, the Brexit decision is the primary thing he's got on his agenda. And that's going to be very difficult over the summer.
And we know the mantra of the campaign that has just gone by. In case you've forgotten it, you probably have. It is deliver Brexit, unite the country, and defeat Jeremy Corbyn. And that is what we're going to do.
But the secondary thing is going to be the economic outlook, which is looking pretty bleak at the moment. The National Institute of Economic and Social Research said there was a 25 per cent chance that we were already in recession. And when we get perhaps a hard Brexit in the autumn, that might make things more difficult still.
So what sort of thing is Boris likely to do? Well, he said he wants the economy to be going gangbusters by the time the UK leaves the EU on the 31st of October. And that might mean a budget early in the autumn, perhaps in September. Where if you were going to do something, you'd probably have to cut VAT if you wanted to put money into people's pockets, add spending power to the economy very quickly.
He's also said he wants to cut taxes on the rich by raising the higher rate threshold for income tax and on lower income earners by increasing the point at which you start paying national insurance. So we can certainly expect a looser attitude to the public finances from this new prime minister. What that will mean for the economic outlook I think still depends on Brexit.
If there's a hard Brexit, then I think we're in for pretty turbulent times ahead. But if there is a smooth Brexit, if he's successful in renegotiating the withdrawal agreement and gets that through the Commons, then there's some upside there. And if he also cuts taxes, well, then maybe we'll see an acceleration of economic growth in the months ahead.
But in the meantime, the campaign is over and the work begins. Thank you all very much.
