Coronavirus (COVID-19): UK fiscal path – a new approach

Ten principles that should underpin the UK Government's new approach

We propose ten principles that the UK Government should follow to balance delivering a further fiscal stimulus that grows the economy and reduces inequality with the need to manage the debt owed by households, businesses and the government:

Public finances

1. Avoid a return to the austerity of the past and adopt flexible fiscal rules. Growing the economy and reducing inequality should take priority over deficit reduction until the economy has fully recovered.

2. Introduce a fiscal stimulus package worth £80 billion, or 4% of UK GDP, to deliver an investment-led recovery, accelerate the transition to net zero and build an economy which has the broader wellbeing of the population at its heart.

3. Cut the standard rate of VAT to 15% for six months once current restrictions have been lifted across the UK. Reduce VAT for the hospitality sector to 5%.

4. Accelerate major investment in low‑carbon, energy efficiency and digital infrastructure and recognise the value of this investment by assessing the government's fiscal sustainability in terms of its public sector net worth.

5. Enable Scotland to shape its own response to the pandemic by providing further consequentials for investment into the Scottish economy and by extending Scotland's fiscal flexibilities.

Support the labour market and improve the welfare safety net

6. Choose to use public money to protect jobs and livelihoods through support schemes and increase the responsiveness, accessibility, generosity of the UK welfare safety net, so that it provides sufficient support for people in and out of work.

7. Introduce a jobs guarantee scheme for young people, increase training, and continue sector-specific employment and business support schemes where needed.

8. Create jobs through a significant reduction in firms' labour costs by cutting employers' National Insurance Contributions and removing the costs of the apprenticeship levy.

Dealing with debt

9. Agree a national debt plan to support businesses, households and the banking system through the economic recovery and manage debt recovery over a longer time period.

10. Reset the monetary policy objective of the Bank of England so that long-term growth and reducing inequality are promoted.