Are there more imaginative ideas out there? Gathered by UnHerd, a selection of economists and other experts — including the Reagan adviser Arthur Laffer, the guerrilla pro-growth activist Joe Reeve, and the former Greek finance minister Yanis Varoufakis — offer suggestions of their own. 

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Abolish the OBR

By Jonny Ball, contributing editor at UnHerd

In 2016, a referendum was won under the slogan “Take Back Control”. Brexit was a project framed around a restoration of sovereignty, for the decisions of the elected legislature to override those of a bureaucratic supranational state.

Having extricated ourselves from the opaque, undemocratic rule of Brussels and Strasbourg, we remain shackled to another undemocratic mess: a bizarre, byzantine patchwork of quasi-autonomous bodies that limit the ambitions of the executive and constrain the decision-making of elected politicians. No other organization encapsulates this trend better than the Office for Budget Responsibility.

This week’s Budget should be the last written under the de facto control of this failed Cameroon creation. Established to prevent government profligacy in the wake of the financial crisis, it has instead tied the hands of successive chancellors to a rigid fiscal orthodoxy based on wildly inaccurate forecasts. It has a remit to scrutinize policy costings and evaluate the government’s performance against its own fiscal targets, with Rachel Reeves strengthening its powers upon entering No 11 by legislating so that no Treasury can bypass its bean-counting processes (her so-called “fiscal lock”). But its interpretations are notoriously fallible, conforming to the famous description of economics as “the dismal science”. Governments are left chasing their own tails, fighting to fill “black holes” that refer to (invariably incorrect) OBR predictions about tax and non-discretionary spending years into the future. These predictions have about as much accuracy as could be gleaned from reading tea-leaves.

The sins of the OBR’s modeling are many. It consistently underestimates the multiplier effects of infrastructure projects. It fails to take into account the true level of private sector activity that results from having properly functioning national assets. This means that it does not adequately distinguish between day-to-day revenue spending (on public sector wages, pensions and benefits, for example), and making long-term investments (in areas such as road and rail networks, energy generation and grid upgrades, digital connectivity, or even R&D). As a result, we overspend on the things we won’t get a return on, and underspend on investments of lasting benefit.

Rather than taking into account the full value of long-term investment, the parsimonious approach of the OBR turns book-balancing and debt reduction into a quasi-religious exercise spread over narrow five-year periods. To once again take back control, the Chancellor should exit a doom-loop that locks us into perennially low productivity, low growth, and a rapidly depleting public realm.

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Cut taxes and welfare

By Arthur Laffer, Reagan adviser who gave his name to the “Laffer Curve”

Independence from Britain is celebrated on average every seven days around the world. Britain’s descent has been almost as great as her preeminence once was — all due to taxing and regulating those who produce and indulging and paying people not to produce. Think of it — which do you think is better for Britain? a) paying people not to work, or b) cutting tax rates on people who do work? Your choice. 

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Make nuclear power viable again

By Joe Reeve, co-founder of Looking for Growth

Every time you put the heating on, you’re paying for Britain’s broken energy system. We were the first country to build nuclear power, but now it takes decades and costs more here than anywhere else. So we buy power from abroad — and every family pays for it in higher bills.

Cheap energy is the foundation of prosperity. The UK pays four times more for energy than the USA. That’s why our economy has flatlined while theirs grows.

The government just spent £1 billion subsidizing energy bills for millionaires because we failed to build cheap energy. This is backwards. We need to stop subsidizing demand and start fixing supply.

The Nuclear Regulatory Review just declared Britain’s nuclear regulator “broken” and showed how to fix it: merge eight fragmented bodies into one, have the Government set risk standards instead of risk-averse regulators, use a fleet approach to approve designs once and roll them out nationwide, and stop legal delays by eliminating duplicative processes.

Rachel Reeves can make this happen. Treasury approval and fiscal rules determine whether nuclear gets built, and the Chancellor can put pressure on the Prime Minister. Even better for Labour, they can claim a win before 2029: streamlined approvals mean small modular reactors can break ground and create jobs within this Parliament.

This unlocks everything. Cheap power means competitive energy for business, AI data centers, and real growth. It means there will be no need for winter fuel payouts. Labour must accept all the recommendations of the report.

Stop subsidizing failure. Let Britain build. Nuclear power is how we cut bills for good.

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Bite the bullet

By John Rapley, political economist

The original sin of the Chancellorship of Rachel Reeves was committed in the 2024 election campaign, when she made a promise she could never keep: to grow the economy and improve public services without raising taxes on working people. Ever since, she’s been bedeviled by a game of whack-a-mole in which she fiddles constantly with the tax system in ways that never seem to raise enough money but do little to stir growth.

The result is that both her tenure and the premiership of Keir Starmer now look imperiled. On its current path, the Labour Party is headed for a trouncing in the spring elections, whereupon a rebellion against Starmer looks likely. Given how closely Starmer and Reeves are bound together, her time as Chancellor may thus be running out.

So why not secure her legacy now? Reeves can make a major change which, if sufficiently unpopular to almost guarantee the end of her tenure, would put Britain on a more solid footing for the long term: raise income taxes. 

As Scandinavian countries show, the most sustainable welfare states are those which are based on a broad social contract — that the price of citizenship secures its benefits. Polls repeatedly show that Britons want good pensions and healthcare but also want someone else to pay for it. Someone must resolve that tension, and doing it might send Reeves down in flames, but secure her place in history. But I won’t be placing any large bets on it.

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Introduce tiered reserve payments

By James Meadway, economist 

Through a happy coincidence, the £20 billion that Rachel Reeves is likely to need to find in order to meet her own self-imposed and badly-written fiscal rules this week is the same amount the Government will hand over to the Bank of England to cover its notional losses on its quantitative easing program. If Reeves wants to do one useful thing next week, rather than a smorgasbord of badly judged ones, she could cut these payments dramatically. 

Launched in 2009, as a novel wheeze to support a flailing economy in the teeth of the global financial crisis, QE involves the Bank of England issuing new money in the form of its reserves, which it then uses to buy (mostly) UK government bonds from the financial institutions holding them. The idea, originally, was to encourage panicked banks to lend more; in 2020, with the exceptional spending demands of the pandemic, the same QE process was used as a backdoor means of financing government borrowing. 

The result was that the Bank was paying interest to commercial banks on the reserves that it had given them, while receiving interest payments on the bonds it had bought. As interest rates have risen, the interest payments on those reserves have risen far above the payments it receives on bonds: by the Bank’s estimates, this difference is around a £150 billion loss over the lifetime of the QE program. The only beneficiaries of these payments are the commercial banks, whose already substantial profits have been inflated by the Bank of England’s generosity.

The Bank claims the payments are necessary to allow its interest rate setting to work effectively. But as its own former deputy governor Paul Tucker has pointed out, these payments don’t need to be made on the whole amount held. A “tiered reserve” system, where the Bank pays interest on a small part of the reserves, would work just as well. Savings could be very substantial: perhaps, on calculations by the New Economics Foundation, £11.5 billion a year could be saved. 

The commercial banks won’t like it. They lose interest payments. But for the rest of us, and surely for a Chancellor desperately scrabbling for cash, it’s close to a no-brainer.

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Break the triple lock, bring in optional property tax

By Julia Willemyns, co-founder of the Centre for British Progress

The arithmetic is brutal. Gilt yields are climbing, the OBR’s headroom has evaporated, and the government has boxed itself in with pledges not to raise major taxes. Our debt interest payments are larger than our defense budget. Demographic pressures are intensifying. The Chancellor needs to find billions without breaking promises, raise revenue without killing growth, and keep bond markets onside.

Most Budget choices in this environment involve painful trade-offs. But two reforms could improve both fiscal position and economic efficiency: fixing the triple lock formula and replacing stamp duty with an annual property tax.

The triple lock is broken. It double-counts price increases: when inflation spikes one year and feeds into wage growth the next, pensions rise twice for the same underlying cost increase. Pensions have risen far faster than forecast. The OBR projects it will add 1.6 percentage points of GDP to state spending over 50 years (£46 billion annually in today’s money).

My preferred solution measures earnings growth and the 2.5% floor over 10 years rather than 12 months, while keeping the annual inflation lock unchanged. This makes the earnings component more stable and prevents double-counting. Pensions would match inflation annually and increase with earnings. Modeling suggests savings of £6.2 billion by 2030, rising to £36 billion by 2040. Crucially, it makes future spending more predictable.

We should also reconsider stamp duty. It is textbook bad tax. It punishes economically beneficial activity (moving house), creates massive deadweight loss, and can be entirely avoided. We should replace stamp duty with an optional property tax: buyers choose upfront stamp duty or switch to a modest annual charge. You could phase this over 10 years and add a 0.5% rate on property values above £2 million to ensure immediate revenue positivity.

The math works. Modeling shows this generates £1.7 billion above the Stamp Duty Land Tax baseline in year one, rising to £8 billion annually by 2050. It also transforms volatile, pro-cyclical revenue into predictable, stable receipts.

This is what good fiscal policy looks like: reforms making politically popular institutions sustainable, and revenue that grows the economy rather than strangling it.

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Help companies buy machine tools

By Rian Chad Whitton, industrial analyst

Britain spends a remarkable amount on industrial policy. The OECD claims we spend 2.7% of GDP on industrial policy measures. Compared to other countries, we are heavily weighted toward providing tax reliefs and grants for small businesses, research and development, and funding for “skills”. But despite all of this, we have a massive problem with capital equipment spending. 

Currently, UK machine tool consumption is just 61% of France’s, 40% of Turkey’s, and 15% of Germany’s. We spend under £500 million on industrial robots annually, and we have a lower robot-to-worker ratio than the global average. This shortfall limits our productive capacity and our attractiveness as a location for manufacturers to invest in. We need these machines, and we need them fast. 

I propose a £1 billion machine financing fund to help companies buy machine tools and industrial robots. This would effectively double British industry’s spending capacity for automation. This would mean a rapid uptake in installations, as well as allowing firms to spend more freely on new employees and facilities. These investments are initially challenging for companies, as they usually take a short hit in profits. Targeted government support in this space would provide much-needed stability. 

Though not a large amount of money in budgetary terms, it should still be financed by making cuts elsewhere. The government could cut the £900 million earmarked for the seventh CfD auction, which will lock in expensive electricity generation. There could also be a significant tightening up on R&D tax credit relief. This year, over £400 million was lost in R&D relief-related error and fraud. We could also cut the boiler upgrade scheme subsidy of £205 million. 

Importantly, this £1 billion would not be dressed up as an investment in innovation or start-ups. Its purpose would be to provide capital equipment to established companies, whether they be large multinational or family-run machine shops. This is a notable area of weakness for Britain, and the situation can be rapidly improved through a simple reallocation of spending.

Establish a national investment bank

By Yanis Varoufakis, economist and former Greek Minister of Finance

Upon winning office, the Government should have established a national investment bank (NIB) to finance green and advanced technology enterprises to the tune of no less than 3% of national income (or around £90 billion) annually. As I wrote last week, the money would not come from the sale of UK government bonds but from bonds issued by NIB itself, to be repaid not from taxation but from the future profits of the green projects it funds. All it would take for NIB bonds to sell like hot cakes would be an announcement by the Bank of England that it is standing by, ready, if need be, to purchase these bonds on the secondary market.

The NIB should still be established. By now, Reeves should know that it is foolish to allow fiscal rules and narrow cash calculations to prevent necessary enterprise. “Anything we can do, we can afford,” J.M. Keynes said in 1942. The problem in the UK today is that, after decades of reducing the state’s capacity to do things, there is little that can be done well. Only by investing public money can Britain’s productive frontier expand again, drawing in private investment in pursuit of common goals.

Development and prosperity will not come because Reeves peppers every speech with a hundred mentions of the word “growth”. It will not happen because she appeases the City by continuing to sign bankers’ welfare checks at the behest of the Bank of England. And it certainly won’t transpire if she remains determined above all else to prove her fiscal orthodoxy to conservative critics who will never give her the light of day anyway. Mindless fiscal rules will only worsen the country’s stagnation.

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Boost public sector investment

By David Owen, founder and chief economist of Saltmarsh Economics 

In ideal circumstances, pre-Budget purdah would have been strictly enforced. And, as others like the National Institute of Economic and Social Research (NIESR) have recommended, Rachel Reeves would move to only one major fiscal event a year, with the OBR focused much more on long-term debt sustainability. 

The fiscal rules would be tweaked to give much more headroom for the Chancellor to boost long-term public sector investment, helping crowd in private sector spending and improve the UK’s dire productivity performances. Public sector net worth would be targeted, not net financial liabilities of the public sector — for the current measure that does not take account of any value of long-term investment projects, only the debt incurred in undertaking them. 

Former heads of the Civil Service would have advised on what really went wrong on their watch, in terms of contracts struck with the private sector, and with privatizations. How come so many of them down the years have proved so costly and led to such bad outturns? Why is public sector productivity so dismal? Lessons would have been learned. 

Long-term enhanced capital allowances and other measures would be introduced specifically targeted on the eight sectors that the government’s June 2035 industrial strategy document singled out as key in improving the UK’s productivity performance: namely advanced manufacturing, clean energy, the creative industries, defense, digital and technologies, financial services, life sciences and professional and business services. 

It is telling how few people appear to have even heard about the 19th industrial strategy review unveiled since New Labour came to power in 1997, earlier in the summer. Up to now, all such industrial strategies have sunk without trace, despite all the work and effort that has gone into them. 

Of course, diagnosing the UK’s problem is not the issue; whole forests have been cut down ever since Harold Wilson’s “White Heat of Technology” speech of 1963. But, as things stand, the UK economy seems to be stuck in a loop of disappointing productivity growth, endless discussion revolving around this cycle of two fiscal events a year, and whether the BofE will or will not cut rates at the next meeting. In my fantasy Budget, Rachel Reeves finally moves the dial. 

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Give big cities fiscal freedom

By Tom Forth, Leeds-based startup founder

In the financial year ending March 2024, Leeds completed nearly 4,500 homes. That was the most in four decades and 35% above its nationally-set local target. If replicated everywhere this building rate would deliver well over 300,000 homes nationally. The rate has kept up since.

Britain’s desperately needed extra homes aren’t the only things getting built in Leeds. The proposed expansion of Elland Road stadium to 53,000 was instantly backed by the city council and has received over 1,000 letters of public support and fewer than 100 in opposition. Microsoft are building a hyperscale data center on a site that will soon also hold one of the largest grid-scale batteries in a British city. The city’s economic vision includes nearly a dozen similar large sites with similarly grand ambitions. All of them will require infrastructure investment to succeed.

Leeds and cities like it need two things from the Budget: stability and freedom.

For decades cancellations, delays, and curtailments to projects like HS2, Northern Powerhouse Rail (NPR), British Library North, and the rebuild of the Leeds General Infirmary have held back growth here. Local plans encouraged to be built around national investments ended up being held hostage by Westminster and Whitehall. A Budget that canceled investment in a mass transit system for Leeds for a fourth time in three decades would be a disaster as would continued dithering on NPR.

Even more importantly, Leeds needs freedom. Freedom to raise a workplace parking levy without the fear of a central government veto. Freedom like London to raise a business rates supplement without a referendum of local businesses. Freedom to raise a hotel tax as cities across Europe and the USA already do.

The ambitions of cities like Leeds have always exceeded the ambitions of central government for them. Unless we can raise money locally to invest in the infrastructure needed to underpin that ambition we will remain at the mercy of others and continue to achieve less prosperity than we could. Such asks are strictly beyond the scope of a Budget, but that would be a good place to start.

The Conservatives can lay claim to be the world’s oldest and most successful political party precisely because, in order to hang on to power and prevent (or at least limit) any truly significant redistribution of power and wealth, they have always been prepared to mix and match policies in way that both appeals to a wide electorate and also makes pinning them down ideologically feel like trying to nail jelly to a wall.

Admittedly, at first glance, the impression of a party totally transformed is easy to run away with. After all, Cameron and Osborne, as well as insisting on balancing the books no matter what the cost to the nation’s deteriorating public services and rising poverty levels, were often portrayed as modernisers hell-bent on dragging the Tories kicking and screaming into the 21^st century. Johnson on the other hand, whatever the cosmopolitan image he worked hard to create as Mayor of London, seems happy to cosplay the authoritarian populist — the leader of a party determined to engage in a ‘war on woke’, to defend the interests of businesses big and small, and to allow nationalism to trump his party’s traditional commitment to economic rationality.

But let’s look, first, a little closer at the Conservative Party under Cameron. Sure, it brought in equal marriage after it made it into government in 2010. But it had to rely on the votes of the opposition Labour Party to do so, since so many of its own MPs rejected the change. Similarly, while Cameron in opposition began by hugging huskies, he ended his time in Number Ten by demanding his colleagues “get rid of all the green crap” — meaning it was left to his unfortunate successor Theresa May to commit the country to net zero. Meanwhile, Cameron’s Conservatives also spent a great deal of time and effort both bringing in draconian policies (accompanied by equally draconian rhetoric) to try and crack down on immigration and badmouthing the European Union — all of which helped fuel the rise of UKIP and ultimately led to Cameron’s fateful decision to call the 2016 referendum.

As for austerity, there is no doubt that it was a reality after 2010 — but far more so for some parts of the state, and some people, than others. The NHS, as it may do now, escaped the bulk of the cuts foisted on so many other public services, while folk on pensions — unlike younger people and the poor — actually did relatively well, presumably because they constituted (and continue to constitute) such an important part of the Conservatives’ voter coalition. Admittedly, policing did suffer cuts, but that didn’t stop the party under Cameron continuing to call its main opponent ‘soft on crime’, as well as framing Labour as the party of immigrants, Europhiles, students, the chattering classes and supposedly work-shy welfare claimants.

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Test article

By Will Lloyd

So what about the party under Johnson? True, Sunak has raised rather than cut taxes, including corporation tax — a move which, notwithstanding reliefs on R&D and temporary cuts to high-street business rates, some pearl-clutching neoliberals will doubtless still insist on seeing as the very incarnation of Johnson’s characteristically unguarded (but also characteristically pretty meaningless) “Fuck Business!” remark. But few if any of those tax rises is remotely progressive, not least the increase in National Insurance which the party pretends will ‘fix social care’ (it won’t). Nor is there any serious suggestion of moving to tax wealth or property to anything like the extent that a serious rebalancing of the economy would require. The hike in the National Living Wage is, of course, welcome, although let’s not forget that it was George ‘austerity’ Osborne who invented the concept in the first place!

Meanwhile, Sunak rescinded his boost to welfare benefits prompted by the pandemic as soon as decently possible — a decision which, for those not in work, will not be compensated for by his eye-catching (and indeed welcome) reduction in Universal Credit’s taper rate. Nor is the Government providing anywhere near enough funding to help poorer pupils who missed so much school catch-up. The same arguably goes for climate change policy, where, especially after the Government’s policy announcements in the run up to COP26, it’s getting harder and harder to escape the feeling that the Tories under Johnson, not for the first time, seem happy to will the ends but not the means.

As for spending more generally, while capital spending and infrastructure projects have received an expected boost, day-to-day government spending (much of which filters down, or rather doesn’t filter down to local authorities) is going to be as tight as ever, making the Government’s endlessly repeated talk about ‘levelling up’ a little hard to credit — unless, of course, we’re talking about money funnelled not to those most in need but to those constituencies in the Midlands and the North which flipped to the Conservatives in 2019 and which Johnson and his colleagues are understandably desperate to hold onto.

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Is Boris taking us back to the Seventies?

By Dominic Sandbrook

For all that, barring an economic meltdown in which the cost-of-living crunch really does become a crisis and the various trading frictions associated with Brexit get worse rather than better, they stand a pretty good chance of doing so.

The voter coalition that Brexit enabled Johnson to build is made up of older voters, of sometimes ethnocentric, not particularly well-educated, intensely patriotic voters living in small towns, and of more affluent voters in already well-served parts of the country who (if they are better-educated and so socially more liberal) are prepared to set aside their discomfort with the Brussels-bashing and the culture wars so long as their taxes are kept reasonably low and their precious house prices kept high. And, like Brexit — indeed precisely because Brexit continues to simmer even if it no longer boils — that voter coalition, whose geographical distribution is nicely suited to Britain’s first-past-the-post electoral system, doesn’t seem done yet.

Certainly I wouldn’t bet on those voters taking seriously against the Budget even if it doesn’t fall hook, line and sinker for Sunak’s ‘new age of optimism’ line as much as his adoring fandom in the Tory-supporting press. They know, we know, that this is the British Conservative Party — doing whatever it takes, two-and-a-half centuries and counting. Rishi or no Rishi, there is nothing new under the sun.