A key prong to the new PM’s economic policy is to increase the size of the economic pie, rather than redistributing it, seemingly funded by higher public borrowing. If the new government’s gamble on GDP growth pays off and it hits its 2.5% real GDP growth target, then the economy and public finances will be in a strong position. But the Chancellor’s “Growth Plan”, due to be unveiled on Friday, will need to contain substantial measures to boost supply rather than measures that predominantly boost demand. Meanwhile, with concerns in the financial markets over debt sustainability mounting, the Chancellor would be wise to head off accusations of fiscal recklessness with a commitment to fiscal discipline in the medium term.
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