About Nesta

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better. We use our expertise, skills and funding in areas where there are big challenges facing society.

Be the Chancellor: a tool for better choices, at a time when no choices are easy

I think, deep in my heart, that if we make it easier for people to be rational, then they will be rational more often.

My 12 years in government taught me that most politicians are rational - although their rationality quite understandably includes getting re-elected. Well, if you thought the other lot would ruin your country, you too would see winning power as important.

The numbers have to add up

Almost every politician knows that financial numbers have to add up, sooner or later. But they don’t always know what needs to be added up, how much things cost, and why economic growth really, really matters.

That is why I am so pleased that Nesta has, once again, partnered with the Institute for Fiscal Studies to update our Be the Chancellor tool.

The tool allows users to change UK tax and spending policies, adjust the assumed path for economic growth and interest rates, and see how forecasts for government borrowing and debt are affected. Launched last year, it’s been enhanced with new features, and updated to reflect recent changes to tax, spending and fiscal rules.

Anyone can make a set of choices and use the tool to identify the fiscal effects of them really easily. In fact, I would say there is no excuse for producing numbers that don’t add up.

"0.1% growth improves the fiscal position by £7 billion a year"

So if you want to be the Chancellor, use the tool now and find out if your ideas are sensible or whether they would lead to the sort of deficit that - as Liz Truss found - would scare the markets and end your career almost before it begins.

Since we first launched this tool last year, it has been used thousands of times. We don’t know that much about who has used it - but calls from people inside the Treasury asking us to explain how it works suggest that it is being used in very influential places indeed.

The most important lesson from the tool is that economic growth really, really matters.

Increasing the rate of growth by 0.1% improves the fiscal position by £7 billion a year by the end of the parliament. That is almost a penny off income tax, or enough money to abolish the two-child limit for benefits twice over and lift hundreds of thousands of children out of poverty. A commitment to growth is both sensible and moral - economic growth and economic prosperity more generally are the cornerstone of a successful society.

More than that, we want to challenge society to think not just about raising or lowering tax rates, but about the complexity of our tax system.

Our tool allows you to abolish some very odd tax exemptions. Why should older workers be exempt from National Insurance? Why should people escape Capital Gains Tax if they keep their assets until they die? Why should there be a tax discount when you sell a business asset? Our tool allows would-be chancellors to see the fiscal dividend from simplifying the system - and then to see how they could spend the money either on improving public services, cutting poverty, or creating tax cuts for many.

Whatever your politics, if or when you end up in power the financial markets will constrain you.

That is a simple, harsh and inevitable reality. In that context it makes sense to work out what you can actually do before you win power - and our tool helps you do just that.

Author

Tim Leunig

Tim Leunig

Tim Leunig

Chief Economist

He/Him

Tim is Chief Economist at Nesta.

View profile