" These three tailwinds – easy money, cheap imports and strong confidence – are no longer available to support growth in Western economies. We cannot wish these conditions back into place. Nor is it sustainable to create a new set of tailwinds based on continual injections of monetary and fiscal stimulus.
It was right to loosen monetary policy and allow public deficits to rise in the depths of the financial crisis in 2008-9. But public finances now need to be put on a more sustainable footing. And when interest rates have already been reduced to rock-bottom levels, additional injections of money through quantitative easing (QE) are likely to have little impact and may even be counter-productive.
To support growth in the current climate, we need to develop a new set of supply-side policies, aimed at helping our economy adjust to the “new normal” world. These policies should focus on improving the underlying competitiveness of our economy by relieving burdens on business, removing barriers to job creation, investing in skills and an efficient transport infrastructure and making the UK an attractive location for investment. That helps to ensure the UK is well-placed to tap into the areas of opportunity in the world economy – such as the continued rapid development of Asia and other emerging market economies and the possibilities created by new technology."