Supporting fiscal policy decisions in the crisis

Lead Research Organisation: Institute for Fiscal Studies
Department Name: IFS Research Team

Abstract

We are going through an economic crisis. The government has responded with an unprecedented policy package, costing many tens of billions of pounds over just a few months - paying for employees to be furloughed, making payments to the self-employed, forgiving business rates, increasing public service spending and making the benefit system much more generous.

Over the coming year, the government will have to decide whether to do more to insure households' incomes and prevent business failure, whether to use fiscal policy to kickstart the economy as the health crisis subsides and, ultimately, how to unwind these measures or whether to make some of them permanent. To guide these momentous decisions we propose targeted new analysis of new data sources, including a soon-to-be-available covid-19 module in a large-scale longitudinal household survey and real-time bank account data from a budgeting app. Combined with IFS' world-leading expertise on tax and benefit policy design and unrivalled familiarity with the institutional and policy context around the UK's labour market, taxes and benefits and the public finances, will inform how fiscal policies should be adjusted in the coming 12 months.

We are having regular discussions and seminars with civil servants and policy advisors at the top of government through this crisis. The new work proposed here would feed in to this engagement directly, allowing us to help policy-makers take difficult decisions in this highly unusual and fast-moving economic environment, including through taking advantage of novel and timely data sources to produce the best possible empirical evidence.