The policy and productivity conundrum for the new Labour government

Fiscal policy will likely remain tight in the coming years, with the deficit gradually decreasing. Although Labour’s new policies are neutral for the deficit, they follow existing tightening measures announced by the previous government, which imply real-term cuts to spending and higher real-term taxation via tax threshold freezes. Productivity growth in the UK has been declining for decades, more so than in many other developed countries. Improving productivity is a challenge, not least because the causes of this secular decline are not entirely clear. Read more from PIMCO.