Afternoon summary
- Downing Street has hit back at the Institute for Fiscal Studies after it said workers face the longest period without a real-terms increase in wages since the second world war. Number 10 said these figures were misleading because disposable income figures show that people are getting better off. (See 4.28pm.) In a separate report the Resolution Foundation said that family incomes would grow for the rest of the decade - but by less than after the financial crisis and not for the poorest third, who will see their incomes fall. It said:
We can look at the outlook for family incomes in the coming years, and it paints a grim picture. Our new income forecast brings together lower earnings growth, higher inflation, and tax/benefit changes. It shows that overall, the rest of this parliament looks set to be as grim as the last, with incomes growing by an average of 0.2 per cent a year, compared with 0.5 per cent a year between 2010-11 and 2014-15. While top earners were hit the hardest following the financial crisis, the big difference looking forward is that the biggest losers are lower income families, with the entire bottom third of the income distribution set to see incomes fall in the years ahead.
- Andrew Lansley, the former Conservative health secretary, has urged the government to invest more in social care. Speaking on the World at One, he said he was “disappointed” that Philip Hammond did not address this in his autumn statement. Lansley said:
The next two years are going to be incredibly difficult. And I think the time is now for trying to put some measures in place to try and help health and social care through those next two years.
- Jeremy Corbyn has called for more money to be spent on hospitals, social care and mental health. Speaking ahead of Labour’s NHS campaign day on Saturday, he said the campaign had three elements.
There’s three elements. One - hospital provision, under-funding of hospitals, waiting times and STP - sustainability and transformation plans, which are putting at risk a lot of A&E departments all around the country.
The second element is social care, under-funding of social care, the need to improve social care and improve the way in which we treat care workers. They’re vital, valuable, very responsible and very well experienced people. They should be treated better and paid better.
Third, there is a mental health crisis across the country. I feel very passionately about this, that’s why I have appointed a shadow minister at cabinet level just for dealing with mental health because I think as a country we have to face up to the crisis we’re in, fund it properly, but above all change the mood music as well. The biggest killer of under-50-year-old men is suicide from mental health conditions - that’s terrible.
That’s all from me for today.
Thanks for the comments.
No 10 hits back at IFS and says disposable income figures show people are getting better off
Number 10 has hit back at the IFS. It says that if you look at disposable income, not wages, then people are getting better off.
These are from Huffington Post’s Paul Waugh.
No10 hits back at IFS, says real household disposable incomes will rise by 2.8% by 2021.
— Paul Waugh (@paulwaugh) November 24, 2016
PM'S spokeswoman: IFS looks at wages but better to look at net income."If you look at livings standards they're at their highest ever level"
— Paul Waugh (@paulwaugh) November 24, 2016
The IFS figures relate to earnings. Number 10 is talking about disposable income, a different measure that includes earnings, benefits and pensions, and looks at what’s left after tax and national insurance have been paid.
Open Britain, the group campaigning to keep Britain in the single market, has put out a statement from Labour’s Chris Leslie saying the IFS analysis shows that the economic warnings about Brexit issued during the EU referendum campaign were accurate. He said:
This is clear proof that the Brexit vote has made working families worse off. The irresponsibility of leave campaigners was breathtaking – they should now be admitting that economic warnings made during the campaign were not Project Fear; they were Project Fact.
Their promises that Brexit would make Britain better off now appear naive and complacent.
Duncan Smith rejects IFS's claim that workers face wage stagnation
Iain Duncan Smith, the Conservative former work and pensions secretary, told BBC News this afternoon that he did not accept the IFS claim that workers face the longest squeeze on wages for 70 years. Asked about its analysis, he said:
Well, actually, I’m surprised because wages are increasing, they’re increasing now, they’re increasing across the board and well above inflation. Yes, there was a period when they were absolutely static. But over the last two, two and a half years, wages hae been increasing and the forecasts all the way have been that wages will continue to increase. So I don’t recognise this dire prediction of no increase at all since the crash.
He also said that he did not accept the forecasts from bodies like the IFS and the Office for Budget Responsibility about the impact of Brexit on the economy.
My sense about this is that the UK economy is already confounding the forecasts. All the forecasts, from the IFS and from the OBR and everybody else, all said that we were going to see a downturn immediately after the Brexit vote. We haven’t seen that. The is growing faster than they predicted. We just saw the debt fall three days ago, when they predicted it would rise. So my sense about this is we are into territory where nobody really knows that the future holds.
Duncan Smith is right about wages growing now, but he ignores the fact that they fell so far, in real terms, that they have not caught up with where they were before the crash. The Resolution Foundation makes the point today in this chart, in its autumn statement analysis (pdf) published this morning.
Here is John McDonnell, the shadow chancellor, on the IFS analysis.
This lost decade for living standards is unprecedented in modern British history and is a damning indictment of the total, abject failure of the Tories’ economic policy during their six wasted years in office. The so-called ‘long-term economic plan’ has meant long-term decline in living standards for working people even as the super-rich and the big corporations are given large tax giveaways.
Chancellor Philip Hammond promised action in the autumn statement for those ‘just about managing’. Instead he has betrayed them by continuing to slash in-work benefits, failing to raise the ‘national living wage’ to the level promised, failing to deliver more funding for our NHS and social care and now he’s threatening pensioners with removing the ‘triple lock’.
Labour has different priorities and will prepare our economy for Brexit. Instead of cutting taxes for the super-rich and giant corporations, we will make sure our NHS is properly funded, support the pensions ‘triple lock’, and introduce a real living wage built on an economy that invests for the long-term so that no-one and no community is left behind.
The IFS has now put up on its websites its distributional analysis slides (pdf).
This one shows the impact of all tax and benefit reforms since the 2015 election. They are highly regressive. The gains in the autumn statement (the light green bars) were very modest, and came nowhere near compensating for the impact of the benefit cuts announced by George Osborne last year.
And this shows the impact of the post-election tax and benefit changes on family groups. Pensioners have done best, especially wealthy pensioners. Working-age families without children were in the middle, and working-age families with children have done worst.
And here are two more important charts from one of the IFS slideshow presentations (pdf).
This one shows the impact the government’s benefit freeze was going to have on families with inflation forecast to grow at the rate expected in March.
And this chart, or rather the dark green bars in this chart, show how the impact as got worse in the light of the new inflation forecasts.
And here is the BBC’s Laura Kuenssberg commenting on these figures.
If PM really wants to make families who're having a hard time make ends meet feel better off, she has huge job if these estimates are right
— Laura Kuenssberg (@bbclaurak) November 24, 2016
Updated
Here is a chart from one of the IFS slideshow presentations (pdf) showing debt as proportion of national income going back to 1700. It has been much higher before, but the two previous peaks were caused by the Napoleonic wars and the second world war.
Updated
And here are some more lines from the IFS briefing.
From my colleague Katie Allen
The @TheIFS detailed analysis of outlook for living standards suggests younger have been and will be harder hithttps://t.co/G9ESySE18R pic.twitter.com/uP0RP2sp5i
— Katie Allen (@KatieAllenGdn) November 24, 2016
The @TheIFS notes that majority of giveaway from yet another fuel duty freeze from the govt goes to better off half of households
— Katie Allen (@KatieAllenGdn) November 24, 2016
From the Daily Mirror’s Jack Blanchard
Don't worry, says the IFS, public debt *has* been higher than this in the past. During World War Two. Oh and during the Napoleonic wars.
— Jack Blanchard (@Jack_Blanchard_) November 24, 2016
And the verdict from the IFS is in: "The big losers from tax & benefit reforms during this Parliament will be low income families."
— Jack Blanchard (@Jack_Blanchard_) November 24, 2016
Big caveat from the IFS: Lots of uncertainty here. We could get a "positive shock" to the economy & actually hit a budget surplus after all
— Jack Blanchard (@Jack_Blanchard_) November 24, 2016
So much for helping the 'just managing'. IFS says Autumn Statement "essentially made no difference". Big hit was Osborne's £12bn welfare cut
— Jack Blanchard (@Jack_Blanchard_) November 24, 2016
(This suggests the respondents to our ICM poll were on the money - see 12.52pm.)
IFS: The economy will be £1,250 smaller for every household in Britain by 2020/21 because of the vote to leave the EU
— Jack Blanchard (@Jack_Blanchard_) November 24, 2016
From ITV’s Carl Dinnen
IFS on tweaks to Universal Credit; "This is not how to design and introduce the biggest reform to our welfare system in decades"
— Carl Dinnen (@carldinnen) November 24, 2016
From PoliticsHome’s John Ashmore
IFS lists some abandoned measures: - tougher PIP tests
— John Ashmore (@smashmorePH) November 24, 2016
- selling annuities
- 'pay to stay' for social tenants
- 'shares for rights'
IFS: Insurance Premium Tax "a tax we need to worry about quite a lot" as it "skews the economy away from production involving insurance"
— John Ashmore (@smashmorePH) November 24, 2016
IFS: Yesterday didn't change fact the big losers over this Parliament "are due to be low income families" mainly due to £12bn benefit cuts
— John Ashmore (@smashmorePH) November 24, 2016
Universal Credit so far
— John Ashmore (@smashmorePH) November 24, 2016
- 4 changes to work allowance
- 1 change to childcare support
- 1 change to withdrawal rate
IFS's autumn statement analysis - Summary
Here are the key points from Paul Johnson’s opening statement (pdf) at the IFS autumn statement briefing.
- Johnson said by 2021 wages would still be lower than they were in 2008 in real terms and that Britain has not had such a “dreadful” period without earnings growth since the second world war. (See 1.14pm.)
- He said the expected rise in inflation meant the real value of the “national living wage” would rise by just over 20% during the course of this parliament, not 25% as expected.
- He said inflation also meant that “the real value of working age benefits like JSA [jobseeker’s allowance] that are currently frozen in cash terms will fall by 7.7% rather than 6.5%”.
- He said Philip Hammond had effectively adopted Ed Balls’ spending plans.
Rather than aiming for Budget balance in 2019-20 Mr Hammond will be happy borrowing 2% of national income, that’s about £40 billion, in 2020-21. Remember that at the last election the then Shadow Chancellor, Ed Balls, said he was aiming to balance the current budget by 2018-19, i.e. borrow just to invest. Keeping to that over the parliament would have allowed borrowing of just over 2% of GDP in 2020-21. To misquote Michael Heseltine, it wouldn’t be far from the truth to say that the new fiscal plans aren’t Osborne’s, they are Balls’.
- He predicted that the government would have to spend more money on health or social care.
Strikingly [Hammond] responded not at all to calls for more money for either the NHS or social care. I’m going to stick my neck out and suggest he won’t be able to do that for much longer.
- He criticised the government for continuing to freeze fuel duty every year instead of simply abandoning the proposed annual increases.
One of the more expensive measures announced was yet another freeze to fuel duty – the seventh year in a row this has happened. If the policy is never to increase fuel duty again, as seems to be the case, we should just be told rather than being told always that it will rise with inflation next year and then that never happening. This is turning into a really big problem both for the Treasury and for our approach to the taxation of motoring.
- He said the OBR’s forecasts were “noticeably more upbeat” than the Bank of England’s.
Earlier this month the Bank projected growth of 1.4, 1.5 and 1.6% in 2017, 2018 and 2019 respectively. The OBR’s projections are for growth of 1.4, 1.7 and 2.1%. That’s quite a big difference.
- He said Hammond’s policy in the autumn statement amounted to “jam tomorrow” not “jam today”.
In the face of deteriorating forecasts Mr Hammond neither tightened fiscal policy nor followed his predecessor’s example of sticking with previous spending plans. He loosened by an annual £10 billion or so. And he loosened in a rather specific way, mostly by increasing planned capital spending. Given the choice between jam today in the form of more money in people’s pockets and jam tomorrow in the form of potential economic returns from greater investment, he went for jam tomorrow.
- He accused Hammond of being disingenuous about the increase in the insurance premium tax, arguing that the 12% rate was hard to justify.
Mr Hammond wasn’t guilty of too many fiscal infelicities yesterday, but the way in which he announced the increase in IPT was certainly one of them. It is half the rate of VAT, he said, as if in explanation of the rise. Well, so it should be - in fact it should be lower. It’s only the value of the insurance – premiums net of pay outs – which one should think of as being VATable. That would imply an IPT rate much less than 10%, not more.
- He said the IFS backed the idea of scrapping the autumn statement, although he expressed scepticism about whether this would happen.
We will also wait and see whether this really is the last Autumn Statement. We have been here before after all. Chancellor Kenneth Clarke also moved from a separate Autumn Statement and Spring Budget to a single Autumn Budget. That didn’t survive a change of occupancy at number 11.
Updated
Here is the full text (pdf) of Paul Johnson’s opening presentation at the IFS briefing.
Workers in Britain face the biggest squeeze on their pay for 70 years as a Brexit blow to the economy knocks wage growth and stokes inflation, according to an analysis of the UK’s government’s latest tax and spending plans.
Picking over Philip Hammond’s autumn statement, the Institute for Fiscal Studies said real wages in the UK – pay adjusted for inflation – will still be below their 2008 level in 2021.
Paul Johnson, the thinktank’s director said in his presentation (pdf): “One cannot stress how dreadful that is – more than a decade without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years.”
The warning follows signs that the pound’s sharp fall since the referendum result is hiking the cost of imports to the UK and could soon be passed on to consumers. At the same time, experts warn pay growth could stall as companies grapple with politicial and economic uncertainty.
On Wednesday, the government’s independent forecasters, the Office for Budget Responsibility, said the economy would slow next year and inflation would rise.
In a separate analysis of the autumn statement, the thinktank, Resolution Foundation, said families faced a worse squeeze on their living standards over the next five years than they suffered in the wake of the financial crisis.
IFS says workers face 'dreadful' decade without real-terms increase in wages
Paul Johnson, director of the Institute for Fiscal Studies, has just started the IFS’s briefing on the autumn statement.
He says wages in real terms will still be below their 2008 levels in 2021. This is “dreadful”, he says.
Here is the key quote.
However, the outlook for living standards has deteriorated rather sharply since March. The OBR is forecasting both lower nominal wage growth as a result of lower productivity, and higher inflation resulting from the exchange rate depreciation. Overall real average earnings are forecast to rise by less than 5% between now and 2021. That means they will be 3.7% lower in 2021 than was projected in March. To put it another way around half of the wage growth projected for the next five years back in March is not now projected to happen. On these projections real wages will, remarkably, still be below their 2008 levels in 2021. One cannot stress enough how dreadful that is – more than a decade without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years.
I will post a full summary of his statement shortly.
Only a third of voters think autumn statement measures will help economy, poll suggests
Only a third of voters think the measures announced in the autumn statement will help the economy, an ICM poll conducted for the Guardian suggests.
ICM carried out its survey online last night and, although respondents were generally positive about the measures in the autumn statement they were asked about, overall they did not seem very convinced that Philip Hammond’s policies would do a lot to help the economy.
Asked if the package of measures announced by Hammond would be helpful or unhelpful to the economy, the results were:
Helpful: 33%
Unhelpful: 8%
No difference: 35%
Don’t know: 24%
ICM also asked about six specific policies in the autumn. All received either majority or plurality support, but there were some interesting variations.
The measure with the highest net support was increasing the “national living wage” by 30p an hour to £7.50. But the measure with the highest number of people both supporting it, and saying it would make a difference, was increasing the income tax threshold to £11,500 in April (a measure announced by George Osborne in March, but reconfirmed by Hammond yesterday).
And the measure with the lowest net support was abandoning the 2019-20 budget surplus targets.
Here are the net support figures for the six policies (percentage saying they are in favour, whether or not they think it will make a difference).
Raising the “national living wage” - 82%
Raising the income tax threshold - 79%
Funding 40,000 new affordable homes - 73%
Investing an extra £1.1bn in transport - 68%
Not seeking any more welfare cuts - 53%
Abandoning the 2019-20 budget surplus target - 49%
And here are the same policies, but this time listed in order of people saying they support them and think the policy is sufficient to make a difference.
Raising the income tax threshold - 42% (against 38% in favour, but thinking it won’t be enough to make a difference)
Raising the “national living wage” - 34% (against 48% in favour/no difference)
Investing £1.1bn in transport - 32% (against 36% in favour/no difference)
Funding 40,000 new homes - 28% (against 45% in favour/no difference)
Not seeking welfare cuts - 24% (against 30% in favour/no difference)
Abandoning budget surplus target - 20% (against 29% in favour/no difference)
ICM Unlimited interviewed an online sample of 1,317 adults aged 18+, online on the evening of 23rd November 2016. Interviews were conducted across the country and the results have been weighted to the profile of all adults. ICM is a member of the British Polling Council and abides by its rules.
Osborne makes £320,000 from speeches in America, Commons register shows
George Osborne made £320,000 in a few weeks from delivering speeches in America, the Press Association reports.
The former chancellor, sacked from the government by Theresa May when she became prime minister in July, has been paid more than £80,000 a go for some of his recent speaking engagements.
The figures, revealed in the latest register of MPs’ financial interests, show Osborne expects to receive payments of £81,174 and £60,578 from JP Morgan for two speeches delivered at the start of October - a total of seven hours work.
Osborne signed up to the Washington Speakers’ Bureau after he left Government and he is due to be paid £80,240 from Palmex Derivatives for a speech in New York he gave on October 27 - which he recorded as a total of two hours work.
Osborne also expects to be paid £69,992 by the Securities Industry and Financial Markets Association (SIFMA) in return for a speech on September 27 and October 18.
Meanwhile, the former chancellor is due to be paid £28,454 for a speech on October 17 from the Hoover Institution at Stanford University.
The latest register of interests also show Michael Bloomberg paid for Osborne and his wife to attend a dinner for the former mayor of New York City in Paris.
The value of the travel, accommodation and dinner in the middle of October was estimated at £4,086.
Osborne has previously disclosed two helicopter trips in the register of interests: one in November 2015 to the Forest of Dean Conservative dinner and another to Ripon North Conservatives’ Summer Reception in July this year.
Updated
Tony Blair says Brexit can be stopped
Tony Blair has given a lengthy interview to the New Statesman. Here are some of the top lines.
- Blair says that he wants to help resurrect centre-ground politics. As the Guardian reported on Monday, he is setting up a new political organisation next year. In his interview he rules out a return to the political frontline himself, but he explains that he wants to help politicians who are challenging extremists.
What I’m doing is to spend more time not in the front line of politics, because I have no intention of going back to the front line of politics, to correct another misunderstanding ... but in trying to create the space for a political debate about where modern Western democracies go and where the progressive forces particularly find their place ... I’m dismayed by the state of Western politics, but also incredibly motivated by it. I think in Britain today, you’ve got millions of effectively politically homeless people ...
What I’m interested in doing is asking: what are the types of ideas that we should be taking forward? How do we provide a service to people who are in the front line of politics, so that we can provide some thinking and some ideas? The thing that’s really tragic about politics today is that the best ideas about politics aren’t in politics. I find the ideas are much more interesting in the technology sector, much more interesting ideas about how you change the world.
- He says that Brexit could be reversed.
It can be stopped if the British people decide that, having seen what it means, the pain-gain/cost-benefit analysis doesn’t stack up. And that can happen in one of two ways. I’m not saying it will [be stopped], by the way, but it could. I’m just saying: until you see what it means, how do you know?
Explaining the two ways in which Brexit could be reversed, he goes on:
Either you get maximum access to the single market - in which case you’ll end up accepting a significant number of the rules on immigration, on payment into the budget, on the European court’s jurisdiction. People may then say, ‘Well, hang on, why are we leaving then?’ Or alternatively, you’ll be out of the single market and the economic pain may be very great, because beyond doubt if you do that you’ll have years, maybe a decade, of economic restructuring.
The Resolution Foundation thinktank has published its full verdict on the autumn statement. As my colleagues Heather Stewart and Jessica Elgot report, it is saying that the squeeze on living standards over the next five years could be even worse than it was during the financial crash.
Here is there story.
This is how it starts.
Families face a worse squeeze on their living standards over the next five years than they suffered in the wake of the financial crisis, as Brexit slows the economy and Conservative welfare cuts bite, according to a new report.
Analysis of Wednesday’s autumn statement by the Resolution Foundation thinktank suggests average earnings are set to grow only half as rapidly as in the austerity years after the economic crisis. At the same time, living standards will be undermined by higher inflation and ongoing welfare cuts.
While the squeeze of the last parliament affected workers across the income spectrum, the foundation says low-paid households are set to be hardest hit over the next five years, because they are particularly affected by planned welfare cuts.
And here is the full Resolution Foundation report (pdf).
McDonnell says Labour committed to keeping the triple lock for pensioners
John McDonnell, the shadow chancellor, has also been giving interviews this morning. Here are the key points he has been making.
- McDonnell indicated that Labour wanted taxes to be fairer, but that it was not looking to increase the overall tax burden.
We’d make sure that instead of giving tax giveaways to the wealthy and corporations, and ignoring the issue of tax avoidance and tax evasion, we’d make sure we had a fair taxation system. And in that way we’re not talking about increasing taxes or anything like that, what we are saying is that we use our resources more effectively.
We will want to abide by the principles that you spend what you earn.
They have given tax giveways on capital gains tax, on corporation tax, on inheritance tax to the wealthy in our community and also to corporations. And what we saw yesterday - they were cutting the universal credits that are going to be given to what they call Jams, the just about managing, people going into work, looking after their families, doing everything asked of them. So they’ve got the wrong priorities.
- He defended Labour’s decision to support a tax cut for people paying the higher rate of income tax. Labour is backing the government’s plan to increase the tax threshold for people paying the higher 40p rate of income tax. Asked about this, he said:
There are large numbers of people earning above £43,000 who are in jobs like train drivers, like senior teachers and others who have been hit and do need protecting.
If we are going to be doing redistribution we should be hitting those who are over [that level]. For example, our policy is 50p on £150,000, reverting to the original tax system we had some years ago.
We have to recognise that the reality of those people on middle incomes and the pressures that they are under, particularly with regard to housing costs in certain parts of our country.
- He said Labour was committed to keeping the triple lock - the law that says pensions will rise every year by 2.5% or in line with earnings or inflation, whichever is higher. The Tories are committed to keeping this until 2020 but Philip Hammond, in his autumn statement, hinted that it could be dropped after that because it is too expensive. Asked if Hammond was right to review it, McDonnell replied:
No, I would be very disappointed if he did [drop the triple lock]. Under the Labour government Gordon Brown wanted to tackle the issues around child poverty and pensioner poverty and that is what he did. He lifted people out of poverty at both stages of their lives, both children and older people ... If we can grow the economy, and we have a fair taxation system, we can afford it.
(McDonnell was right to say the last Labour government did a lot to reduce pensioner poverty, but the triple lock was actually a coalition policy, not a Labour one.)
- He said the government’s failure to set out its Brexit stance was increasing economic uncertaintly.
We can’t do these negotiations without openness and transparency. People need to know where is the government going and how is it going to get there. At least then you stabilise things and people will be able to settle down into serious negotiations and we will get the best deal. Until the government gets to that position, we are going to have these uncertainties and this speculation.
- He played down the significance of a picture showing many Labour MPs looking at their phones in the Commons chamber when he was responding to Hammond yesterday. He said:
It doesn’t look brilliant but that’s what they do now and they have to think themselves. The new style in parliament at the moment is people are tweeting all the time. They’re doing a running commentary on what’s going on. It doesn’t look good, but that’s what happens.
It’s interesting because everybody’s got these new handheld devices all the time, they’re tweeting all the time, but interestingly enough the general response to the points I was making was received quite well within parliament and outside.
And it’s interesting – I’ve never seen this before and this is not me boasting – if you looked at the MPs opposite me and those behind, I held their attention. Even though they’re tweeting, they’re tweeting about what I’m saying.
John McDonnell responded to #as16 and Labour MPs looked at their phones. Me for @IndyVoices (Pic via @MailOnline) https://t.co/30axh5uVSp pic.twitter.com/hm1Ec4RxP3
— John Rentoul (@JohnRentoul) November 24, 2016
Philip Hammond's morning interviews - Summary
Here is a full summary of the main points from Philip Hammond’s interviews this morning.
- Hammond said the economic future was uncertain because no one knew what the outcome of the Brexit talks would be. When it was put to him that the government was at fault for telling the Office for Budget Responsibility very little about its Brexit plans, he said that the government had said what it wanted: the greatest possible access to European markets. But the outcome of the Brexit negotiations would not just depend on what the government wanted, he went on.
The fact is, it is not about what we want the outcome to be. It’s going to be a negotiation. We are going to sit at the table with the representatives of the European Union. And nobody, at this stage, can be certain about what the outcome of that negotiation will be. That is what creates the uncertainty, whether you are a chancellor of the exchequer trying to forecast the public finances for a couple of years down the line or whether you are a businessman making an investment in a production line.
He said the government was preparing for “a range of possible outcomes” from the Brexit talks. “That’s a sensible and prudent thing to do,” he said.
- He defended the OBR, saying the government would be wrong to ignore its forecasts. Pro-Brexit Tories have criticised the OBR, saying its forecasts about the impact of Brexit on the economy are wrong. Hammond said it was important to remember that forecasting was not a precise science. But he said the government would be wrong to ignore what it said.
Economic forecasting is not a precise science. And the OBR itself makes the point in its report that there is a very high degree of uncertainty around the report that they issued yesterday because of the circumstances that they are in.
When it was put to him that this means he thinks the OBR forecasts should be taken with “a pinch of salt”, as the Telegraph claims this morning, he replied:
I think we should look at what the report is projecting, we should certainly not ignore that, we should look at it as one of the possible range of outcomes that we need to plan for.
The BBC’s Ross Hawkins has posted this on Twitter, pointing out that Hammond was right to say the OBR has acknowledged a high degree of uncertainty.
There is a wide range of uncertainty around the forecasts says Hammond. This is true pic.twitter.com/ytPC3FCLoX
— Ross Hawkins (@rosschawkins) November 24, 2016
- He said the government was preparing for a possible economic slowdown next year.
To me it makes sense, given the warning signals from the OBR report, to keep a little bit of firepower in the locker, to build a little bit of a reserve so that if there is a slowdown next year, we’ve got enough capacity to support the economy, to protect jobs, to ensure that the economy can get through any headwinds it encounters.
- He rejected claims that debt was out of control. When it was put to him that the government had lost control of debt he replied:
It’s not out of control, it’s larger than we would like it to be.
- He rejected claims that the autumn statement contained nothing for “Jams”, the families who are “just about managing”. When this was put to him, he replied:
I don’t think that’s true at all. We are facing very significant fiscal challenges. Within the constraints that that imposes, we’ve tried to focus what firepower we do have on helping those who are ordinary working families who are hard-pressed to get by.
Stopping the scheduled rise in fuel duty was an important step in that process. Reducing the taper in universal credit so that people in work on low wages are able to keep more of their wages. Recommitting to raising the personal allowance in the income tax system to 12,500 by the end of this parliament despite the fiscal challenges will leave everybody in this country better off.
And of course a rise in the “national living wage” which will put 500 a year in the pockets of somebody over 25 working full-time on the “national living wage”. I think those are important steps forward.
- He rejected claims that the government was now adopting the spending plans Labour proposed at the 2015 general election. Labour would have exempted investment spending from borrowing rules, he said. He said his new fiscal rules included investment spending.
- He rejected claims that he ignored the NHS in his statement. When this was put to him, he replied:
It is not true that it was not mentioned. If you read the statement, it absolutely was mentioned. As I said yesterday in parliament, it may have been my first autumn statement, but I’m not a complete rookie and I would not have failed to mention the NHS.
- He rejected the ideal of Nigel Farage playing any role in the government’s relations with Washington. Asked about this, he replied:
If I ever need any advice from Nigel Farage I’ve got his number and I’ll give him a call. Tell him not to hold his breath.
Paul Johnson, director of the Institute for Fiscal Studies, will present his full verdict on the autumn statement at 1pm, but he was on the Today programme this morning. He admitted that economic forecasts were “always wrong”. But the Office for Budget Responsibility was more optimistic about the impact of Brexit than other bodies, he said.
The broader point is that, yes, of course, forecasts are always wrong, and Robert Chote at the OBR has always been very clear about that, but they are made as the best you can do at the time.
The actual forecasts that we have got from the OBR are in fact considerably more optimistic than those we have from most independent forecasters, and significantly more so than those we have from the Bank of England.
We really don’t know very much about where we will be, certainly after 2019.
Hammond defends OBR, saying government would be wrong to ignore its forecasts
Earlier I posted some of the main lines from Philip Hammond’s morning interview here, but I’ve taken them out because there is now a full summary here, at 10.05am.
Updated
Q: You used to sell cars. How would you feel if you bought a car and it did not do what was promised. Do you owe the country an apology?
Hammond says the government has created jobs and cut the defict by two thirds. When the facts change, the government must respond. He says he set out a responsible package with limited, additional borrowing.
And that’s it. The interview is over.
I’ll post a summary soon.
Q: So this means people will just have to be prepared for having less money, because inflation will eat it away.
Hammond says if sterling stays at the current level, and if importers pass on their costs, inflation will rise. But we don’t know if importers will pass those costs on. This is a work in progress, he says.
Q: You chose to spend more money even though borrowing is forecast to go up. And you largely spent that money on what Labour used to call borrowing to invest.
Hammond says the government chose to borrow an extra £23bn over the next five years and invest that in areas where it might improve the productivity of the economy.
Q: So when you criticised Labour at the last election, you should have said you would copy their ideas.
No, says Hammond. He says Labour proposed to exempt investment money from borrowing rules. The government is not doing that, he says. We have to live within our means.
Q: The Resolution Foundation says people will be worse off in this parliament than in the last, because of rising inflation.
Hammond says the OBR forecast suggests inflation will rise to 2.5% next year. That is higher than we have been used to, but not high by historical standards. And sterling has down, making imports more expensive.
He says the government must keep the economy growing and raise productivity.
There is no other way of protecting living standards, he says.
Q: Isn’t the government contributing to this? The OBR asked about the government’s Brexit plans and was given two paragraphs from a Theresa May speech saying nothing.
Hammond says the government wants the best possible access to the single market. But it will be a negotiation. No one can be certain what the outcome will be, he says.
Q; So you must prepare for the possibility that the Brexit talks do not go well.
Hammond says the government is preparing for a range of possible outcomes.
The OBR forecast includes a range of outcomes.
Q: Are you saying you don’t believe the OBR forecasts? The Telegraph says you take these forecasts with a pinch of salt.
Hammond says forecasting is not a precise science. The OBR itself says there is a large degree of uncertainty. The government should not ignore these forecasts. It should include them in the range of possibilities for which it plans. It should not ignore the strengths of the economy. And it is right to keep something aside.
Q: You seem to be distancing yourself from the forecasts.
There is a wide degree of uncertainty, says Hammond.
Q: So it may be tosh?
Hammond says there are many factors causing uncertainty.
Q: This is higher debt than after the oil crisis or the banking crisis. Some people say this is not just an economic failure, but a moral failure. That is what the Tory manifesto said in 2015.
Hammond says the government has controlled public spending. It has generated nearly 2.8m new jobs. And the OBR says another 500,000 new jobs will be created this parliament.
Q: But debt is out of control. Your manifesto said that was a moral failing.
Hammond says debt is not out of control. But it is larger than the government would like.
The government has to keep the downward pressure on borrowing.
Philip Hammond's Today interview
Nick Robinson is interviewing Philip Hammond.
Q: Is it time to apologise for saying you would tackle the deficit when you haven’t?
Hammond says the Tories inherited a budget deficit of more than 10% of GDP in 2010. It has come down by two thirds. There is more work to do, he says.
As usual, the morning after the autumn statement, the chancellor and his Labour opposite number are doing a round of interviews. Philip Hammond will be on the Today programme shortly, and I will be covering his interview in full.
Yesterday Hammond told MPs that the Office for Budget Responsibility thinks Brexit will cost the country £59bn over the next five years. Tory Brexiteers have dismissed this analysis, and Iain Duncan Smith, the former work and pensions secretary, said this was “another utter doom and gloom scenario”. But last night David Gauke, the chief secretary to the Treasury, defended the OBR. He told Newsnight:
We have an independent body that makes the forecasts and it is sensible for a government to work on the basis that that independent body has got it right.
Hammond is likely to say much the same. We will find out in a moment.
Later, at 1pm, the Institute for Fiscal Studies is holding a press conference to give its verdict on the autumn statement.
As usual, I will be covering the breaking political news as it happens, as well as bringing you the best reaction, comment and analysis from the web. I plan on posting a summary at lunchtime and another in the afternoon.
If you want to follow me or contact me on Twitter, I’m on @AndrewSparrow.
I try to monitor the comments BTL but normally I find it impossible to read them all. If you have a direct question, do include “Andrew” in it somewhere and I’m more likely to find it. I do try to answer direct questions, although sometimes I miss them or don’t have time. Alternatively you could post a question to me on Twitter.
