Title page 1

Contents 3

Summary 1

Introduction 3

Defining austerity 4

What do the numbers say? 4

Deficits versus debt 6

A price worth paying? 7

Could looser fiscal policy have boosted growth? 7

A defence of austerity 8

Conclusions on austerity 9

The economic impacts of Brexit 9

The immediate market reaction 10

1. 'Crystal ball gazing' 11

2. 'Top down' (or doppelgänger) models 12

3. Bottom-up studies 13

A better approach 14

Conclusions on Brexit 16

References 18

Figure 1. UK total managed expenditure in real terms and as a percentage of GDP 5

Figure 2. UK cyclically adjusted borrowing as a percentage of GDP 6

Figure 3. Total public sector service productivity (Index 1997 = 100) 8

Figure 4. Sterling narrow effective exchange rate (2020 = 100) 11

Figure 5. Real GDP per capita (Q2 2016 = 100) 13

Figure 6. Non-dwellings investment (Q2 2016 = 100) 14

Figure 7. CPI food and non-alcoholic beverages (2015 = 100) 15

Figure 8. Cumulative growth in real GDP between Q2 2016 and Q4 2025 15

Figure 9. Cumulative growth in real GDP per capita between Q2 2016 and Q4 2025 16