ECONOMY

UK warned tax won’t return to pre-Covid levels for decades after ‘series of economic own goals’ – UK politics live


Key points from the IFS briefing

Here are the main takeaways from the Institute of Fiscal Studies’ briefing on the autumn statement this morning:

Key events

Filters BETA

Nicola Sturgeon has said Scotland’s budget for next year will be a “difficult balancing act”.

Responding to the Chancellor’s autumn statement made on Thursday, the First Minister wrote in the Daily Record newspaper that – “despite repeated requests” – there would be no support for the Scottish government to deal with inflationary pressures in this year’s budget.

Instead, some £1.5bn in Barnett consequentials will made available to the devolved administration over the next two years, described by Jeremy Hunt as “extra help”.

She wrote:

Over the coming days, officials will scrutinise the numbers to understand precisely what the chancellor’s statement means for next year’s Scottish budget, which will be presented to Parliament on 15 December.

It clearly will be a difficult balancing act, but we will do all we can within our limited resources to mitigate the impact of the cost of living crisis on Scotland’s families and businesses and continue building a fairer, greener and more prosperous Scotland.

Key points from the IFS briefing

Here are the main takeaways from the Institute of Fiscal Studies’ briefing on the autumn statement this morning:

The IFS briefing has now wrapped up, but you can catch up on director Paul Johnson’s opening remarks and see all the graphs and slides on their website here.

Schools spending is growing in real terms, says the IFS’s Ben Zaranko, but he warns that this follows 15 years of lost schools funding growth so the picture is not as rosy as it might sound.

Emmerson added that this applied to other areas – after years of spending cuts it is harder to make additional cuts, especially in areas such are healthcare which are grappling with increased costs following the pandemic.

Anna Isaac

Here’s the Guardian’s city editor Anna Isaac’s full report on the IFS briefing this morning:

Rising rates of people who are off work with long-term sickness, many of whom often don’t return to work, is very concerning for longer term economic growth, says the IFS’s Xiaowei Xu.

This means there is a falling labour supply and – combined with lower immigration – means “we’ll really have to look at how we can get productivity going again”.

Johnson added there are growing numbers of young people on personal independence payments due to mental health problems. “The government needs to get a grip on this,” he said.

Deputy director Carl Emmerson said we need a set of policies that offer “sustianble growth” rather than pumping money into the economy.

Serious tax reform rather than tinkering with tax rates, also education and planning reforms, he suggested.

Doing them isn’t easy and there’s a reason why government shy away, he said.

The returns will be in the long run – if you get education policy right it will take decades to reap the rewards. “There are no quick fixes here,” he said.

Johnson added that governments have prioritised “other things” than growth in recent years.

Brexit was ‘very clearly’ an economic own goal for the government, says IFS director

IFS director Paul Johnson has been pressed by journalists in the Q&A what the “economic own goals” he alluded to in his opening remarks are.

He said they include the following:

  • Slashing investment spending in 2010, announced by last Labour government but continued by George Osborne. “Not a good way to get growth,” he said.

  • Cutting spending on education especially “huge cuts” to vocational and further education but also schools. Although schools spending is going up, FE didn’t get a mention in the autumn statement.

  • Brexit “very clearly” – economically speaking that has been “very bad news indeed” and continues to be, especially because of the hard Brexit and distancing from single market.

  • The mini-budget “obviously didn’t help” – “another large own goal”.

  • The general economic and political instability and uncertainty, with three prime ministers and four chancellors in a few months, “and to be reversing policy here, there and everywhere”.

Xu said the uprating of the benefits cap is “welcome” and will come as a relief to families – but in a context where prices have increased by 24% it still represents a big cut since April 2016.

The current uprating is just keeping pace with inflation and real benefit levels won’t return to pre-pandemic levels until April 2024, she added.

Senior research economist Xiaowei Xu says real household disposable incomes will fall by 7% over the next two years.

Since 2008 we’ve seen more shocks than in previous decades – but falls over next two years are the largest since records began. This follows a “lost decade” since 2008.

We won’t return to pre-pandemic levels of household incomes until after 2027/28. We’ll be a third poorer than we would have been had pre-2008 growth trend continnued.

We’re heading for another lost decade despite a large package of government support for the cost-of-living crisis such as the energy price guarantee, she said.



Source link

Show More

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button