Economists have sounded the alarm about Britain’s financial policies and are urging the government to reverse controversial spending decisions.
The Organisation of Economic Co-Operation and Development is an economic think-tank with many of the world’s leading industrial nations, including the UK, as members.
In a hard-hitting report, the OECD has unpicked the UK government’s economic plans and wants changes to put the country on a path to better productivity, improved inequality and higher growth.
One of the big changes the government should make, says the OECD, is to scrap the triple lock on state pensions in favour of a new annual review matching the rise in average earnings.
“The Chancellor Phillip Hammond should perform a tax and spending review to allow for additional productivity-enhancing fiscal initiatives, such as raising national insurance contributions for the self-employed and indexing the state pension on average earnings only,” said the report.
U-turns send wrong message
These measures would put public finances on a more even keel as the population ages and share the financial burden of reducing the deficit more fairly, explained the OECD.
The report comes during the build-up to the Chancellor’s Autumn Budget 2017, when he will lay out his vision of the economy for the next financial year and beyond.
The OECD is heavily critical of his and Prime Minister Theresa May’s U-turns on changing the national insurance rules for the self-employed and axing proposals to cancel the pension triple lock.
The report forecasts UK growth will fall to 1% next year and that Brexit is putting the brakes on the economy.
Britain needs to trade with EU
“The United Kingdom is facing challenging times, with Brexit creating serious economic uncertainties that could stifle growth for years to come,” said OECD Secretary-General Angel Gurría.
“Maintaining the closest economic relationship with the European Union will be absolutely key, for the trade of goods and services as well as the movement of labour. Macroeconomic and fiscal policy can and should continue being used to support the economy, both during and after the exit negotiations.
“Future prosperity will depend on new reforms to improve job quality, boost labour productivity and ensure that the benefits are shared by all.”
The triple lock guarantees the state pension will rise at 2.5% or any annual rise in the cost-of living measured by the consumer price index or the yearly increase in average earnings, whichever is highest.