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Significance Government measures to boost the economy, including tax cuts in November, are having little effect. There is little scope for further stimulus in the March budget. Political uncertainty constrains business investment while low real-wage growth holds back consumption. Impacts Bank rate setters are split on how quickly to begin cutting rates; with inflation easing to 2% only slowly, these divisions may well widen. Real disposable household incomes will be static, with the incomes of those in the lower half of the income distribution falling modestly. The Labour Party has pledged to follow government plans if it enters government, which will leave it little room for fiscal stimulus. Projects such as HS2, and Labour dropping its GBP28bn Green Investment scheme, bode ill for hopes of more post-election major investment. Geopolitical risks such as the US protectionist turn, Russian victory in Ukraine, and Middle East unrest cloud the outlook.
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