IFS says workers face 'dreadful' decade without real-terms increase in wages - Politics live

Photo of IFS says workers face 'dreadful' decade without real-terms increase in wages - Politics live

Rolling coverage of all the day’s political developments as they happen, including reaction to the autumn statement and the IFS press conference

Here is a full summary of the main points from Philip Hammond’s interviews this morning.

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.

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.

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.

There is a wide range of uncertainty around the forecasts says Hammond. This is true pic.twitter.com/ytPC3FCLoX

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.

It’s not out of control, it’s larger than we would like it to be.

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.

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.

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.

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.

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.

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: 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.

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: 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: 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.

Nick Robinson is interviewing Philip Hammond.

Q: Is it time to apologise for saying you would tackle the deficit when you haven’t?

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.

Related: Brexit will blow £59bn hole in public finances, admits Hammond

Continue reading...
view The Guardian: Economics
#eu referendum and brexit
#institute for fiscal studies
#george osborne
#tax and spending
#autumn statement 2016
#tony blair
#john mcdonnell