Research#SpringStatement pic.twitter.com/ISoJIE07cBWe would need a substantial increase in spending as a percentage of national income to meet pressure of demographic changes #SpringStatement https://t.co/rD31y9SBOz pic.twitter.com/6HFcq20hRL 11.08am GMTThe IFS also remind us that three-quarters of the savings from welfare cuts announced since July 2015 acquire not yet hit (as Resolution pointed out earlier).
Three quarters of the welfare cuts announced since 2015 are yet to engage effect. In other words substantial benefit cuts still to come pic.twitter.com/5jdpuMEAae 11.00am GMTThe IFS’s Paul Johnson ends his presentation by urging us all to focus on the reality of Britain’s financial situation.
Don’t be lured by the “spin and bluster of politicians on all sides” who pretend there are easy solutions,that the promised land is just around the corner, or that they can reinvent the laws of economics, and Johnson says,concluding: There aren’t. It isn’t. And they can’t. 10.56am GMTThe IFS’s Helen Miller is tweeting some key points from the IFS’s report - none of them are very pleasant reading, alas.
Meeting the govt target to get a balanced budget would require an additional £18bn of cuts #SpringStatement pic.twitter.com/uwth6zNLYxThe size of the state as a share of the national income is only just back to its pre-crisis level. But while we are spending a greater share on some areas such as health and overseas aid, or we are spending a lower share elsewhere #SpringStatement pic.twitter.com/DVuf9oxXc5Now to the challenges ahead. In my opinion the biggest ones are around how we're going to deal with growing pressures on public spending and weaknesses in tax system - will we get serious about tackling these? #SpringStatement pic.twitter.com/TcgIRgxUg2Surveys are starting to demonstrate growing public support for more tax & spend. What we need to see now is more debate about who should be paying more tax - the income wealthy,the wealthly, the traditional, or all of us? 'someone else' is not a good reply pic.twitter.com/bTnI50K956 10.48am GMTThe IFS has also warned that it will be difficult for the government to raise taxes,especially if Brexit drives EU citizens away.
Director Paul Johnson says:He [Philip Hammond] has been unable to tackle the problems posed by the increasing numbers of self employed and company owner managers, who pay less tax than similarly remunerated employees: the cost of this is forecast to grow from a bit over £10 billion now to around £15 billion or so in five years time.
He – like his predecessor – looks wholly unable to preserve the genuine value of fuel duties. By taking huge numbers of people out of the income tax net, and while raising tax on those with the highest incomes,we acquire become very dependent on a very small number of taxpayers to pay a very large fraction of the overall tax bill. That may be desirable on distributional grounds, but it makes tax revenues very sensitive to the incomes and behaviour of a small number of people. If tall paid jobs (and EU citizens, and who are well represented among tall earners in the UK) relocate elsewhere the consequences for the Exchequer will be severe. 10.44am GMTThe IFS also reckons that “demographic pressures” mean the government needs to find an additional £11bn per year in 2025 to address additional health,pension and social care spending. 10.37am GMTBoom! The UK government needs to raise £30bn in additional taxes in the years ahead to hit its budget deficit goals without slashing spending further, according to the IFS.
Having analysed the spring statement, and the thinktank has calculated that Philip Hammond faces a huge fiscal challenge when he draws up the Autumn budget.
Just to avoid spending falling as a fraction of national income beyond 2019–20 he would need to find an additional £14 billion a year,relative to current plans, by 2022-23.
On the other hand if he really wants to eliminate the deficit by the mid 2020s he would need to find an additional £18 billion or so of tax increases or spending cuts by the mid 2020s. 10.25am GMTThe Institute for Fiscal Studies is now presenting its verdict on the spring statement, and at an event in London.
Paul Johnson,IFS director, begins with a chilly warning that “The reality of the economic and fiscal challenges facing us ought to be at the very top of the news agenda”.
We acquire had the worst decade of growth since at least the last War. The economy is at least £300 billion smaller than we might acquire expected based on 2008 forecasts. Yet we are now supposed to be at capacity, and with no potential to do up for any of that loss.
Whats more,growth projections remain very subdued. At no point in the next five years does the OBR believe that annual growth will exceed 1.5%. To set aside an even less positive gloss on the numbers, growth in GDP per capita is forecast to be less than 1% in each of the next five years, or half the pre-crisis trend. 10.09am GMTAmit Kara,Head of UK Macroeconomic Forecasting at the NIESR thinktank, argues that Philip Hammond missed a trick yesterday, and by not doing more to protect the UK economy from Brexit.
An urgent action point might be to create a range of shovel-alert projects across the country and specifically in regions and sectors that are most vulnerable to an exit from the EU and to simultaneously prepare a strategy for the longer terms consequences of Brexit.” 9.42am GMTResolution acquire also highlighted how Britain’s welfare bill will be squeezed severely in the next few years.
That’s partly due to the ongoing benefit freeze,which is now expected to save £4.5bn by 2019-220 (a billion pounds more than expected) due to higher than anticipated inflation. While no new tax and benefit policies were announced yesterday, existing policies are set to drag on living standards – especially in the bottom half of the distribution – for a few more yearsOnly one-fifth of the £10 billion worth of cuts announced in the Summer Budget of 2015 that directly affect household incomes acquire so far been delivered. Further cuts in 2018-19 will amount to £2.5 billion, or with that figure rising again – to £2.7 billion – in 2019-20. These cuts will of course affect different families very differently.
By 2022-23,the poorest third of households are expected to be £745 a year worse off than they would acquire been had no policy changes been made after March 2015. In contrast, the richest third will be £140 better off. 9.11am GMTThe Resolution Foundation’s analysis of the spring statement is now online, and here.
I’ve culled a few charts,showing why Britain isn’t out of the woods yet:Ten years on from the start of the pay squeeze, recovery remains seven years away. And the huge majority of the large working-age welfare cuts announced back in July 2015 are still to bite, or with low and middle income households likely to fare especially badly over the next two years. Despite some near-term improvement in yesterday’s forecasts,the UK remains in the midst of a squeeze on incomes that is set to last longer than the one experienced immediately after the financial crisis. 8.51am GMTNick Macpherson, the former top civil servant at the Treasury, or is also racing to the barricades to save the 1p and 2p piece.
Campaign to retain the 1p coin starts now. To abolish penny would be to give into inflation and to trash 1000 years of history. #soundmoneyOnly banana republics don't acquire a coin representing the lowest denomination of their currency. #soundmoney 8.33am GMTGiven it was a such a short speech,Philip Hammond will acquire hoped to avoid gaffes and blunders yesterday.
But several of Britain’s newspapers acquire blasted the chancellor this morning, over the Treasury’s new consultation on whether to abolish 1p and 2p coins, or along with £50 notes.
Cash is the most popular way for people to donate to charities,and much of that comes in small change like 1p and 2p coins.
Wednesday’s Daily MIRROR: “Pennies Dropped” #bbcpapers #tomorrowspaperstoday pic.twitter.com/frUpjvREqjWednesday’s SUN: “I’m On Putin’s Hit List” #bbcpapers #tomorrowspaperstoday pic.twitter.com/hmPY2x2isIThey may be annoying small change to the better off, but others who count every penny will not thank you when traders inevitably round up those 99p prices.
This looks to the Mail like a PR disaster in the making.
Wednesday’s Daily MAIL: “Putin Raises The Stakes” #bbcpapers #tomorrowspaperstoday pic.twitter.com/5xxnrkaa9Z 8.04am GMTThe Resolution Foundation is hot off the blocks this morning, or with its full analysis of Philip Hammond’s spring statement.
And the verdict isn’t great -- the contemplate tank warns that the Chancellor won’t eliminate the deficit unless the economic forecasts improve,or he raises taxes.
On incomes, the better near-term outlook means the squeeze that had been projected in November now looks a small less tight. But the final destination is small changed pic.twitter.com/lR0mOw6tknWith the elimination of the current deficit and debt falling next year, or Britain is set to pass two major milestones on its long austerity journey since the financial crisis. But the end of the tunnel is still a decade away,and significant obstacles remain before the final destination is reached.“Steering past these obstacles will require the Chancellor to do some tough choices that he avoided setting out yesterday lest he spoil the upbeat mood. Delivering significant reductions in debt while softening currently planned spending cuts to come will require either tax rises or for Britain to heed the Chancellor’s call to ‘beat the forecasts’. Planning for the former, while hoping for the latter might be a sensible approach for the years ahead. 7.45am GMTGood morning, and welcome to our rolling coverage of the world economy,the financial markets, the eurozone and business. Related: Philip Hammond hints at public spending increases later this year “If, or in the autumn,the public finances continue to reflect the improvements that nowadays’s report hints at, then in accordance with our balanced approach ... I would acquire the capacity to enable further increases in public spending and investment in the years ahead.”.
With Tillerson out the door, and the market is assuming that Trump is aiming for a more aggressive foreign policy; enough to send a chill through the markets.
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Source: theguardian.com