The OBR's David Miles and IFS's Helen Miller yesterday warned the govt can't afford to protect households from rising energy costs as a result of the Iran war. People need to adjust their expectations of what the state can do after Covid and Truss's 2022 energy package.
The Bank of England is running AI macroeconomic scenarios to anticipate what the tech may do to UK jobs and growth, as well as the potential risk of a financial shock. The internal work follows the apocalyptic Citrini report and the OBR's own assessment www.bloomberg.com/news/article...
Genius
Reeves got lucky with the OBR forecast - for once. But the UK's fortunes are again tied to events outside our control. Her fiscal event was supposed to be nothing-to-see here. But more striking was what she didn't say. (Defence,energy, migration, spending pressure)
www.bloomberg.com/news/article...
Labour's growth plan is more investment. Most (80pc) is UK private sector. By driving up employment costs, it is pushing firms to invest. The numbers are improving. But the price is higher unemployment.
UK is looking less US these days, and more French www.bloomberg.com/news/article...
Bizarre twist in Reeves’ plan to scrap the OBR headroom assessment in the Spring Statement next month. It won’t technically assess her fiscal rules but it will publish a headroom number, Treasury Perm Sec said yesterday. Which begs the question, what’s the point ..?
BOE appears to think it has tamed inflation even after cutting rates twice more this year. The more immediate danger now seems to be a spike unemployment.
www.bloomberg.com/news/article...
Trawling through BoE transcripts from 2017 released today was this limerick sign-off from Minouche Shafik, now Starmer’s econ adviser, at her last MPC meeting. Inspired by @adamposen.bsky.social who “took to poetry in his final meeting” apparently
The OECD is drawing up fiscal literacy classes for politicians to ensure they get the risks when calling for tax cuts or spending hikes. Any parliament can join. Several are interested tho not Westminster yet. Scotland will launch a version after its election.
www.bloomberg.com/news/article...
Despite being a “proud” recipient of welfare he believes that state has become unaffordable and the benefit bill needs to be brought under control
www.bloomberg.com/news/article...
He’s evidently a little disappointed with the budget that his former c/e Torsten Bell had a hand in, but is not critical www.bloomberg.com/news/article...
Clive Cowdery tells @bloomberg.com how Resolution Foundation became the UK’s most influential think tank, talks about his remarkable personal journey from care homes to £millions and his “frenemy” Paul Marshall
www.bloomberg.com/news/article...
Runners and riders to replace Hughes at the OBR. Andy King, Ruth Curtice, Stephen Farrington, Paul Johnson, Sam Beckett, Gemma Tetlow, Rain Newton-Smith www.bloomberg.com/news/article...
New paper cited by BOE ratesetter Swati Dhingra and co-authored by BOE senior economist Philip Bunn puts the Brexit damage at twice the OBR's 4% estimate. And it's been getting worse since the TCA came into force
www.bloomberg.com/news/article...
glad to see this piece from summer on Labour's "all pain, no gain" strategy still works www.economist.com/britain/2025...
At the Budget the Chancellor needs to do 3 things: take decisive steps to improve the public finances &increase the financial buffers against her fiscal rules; address cost of living pressures for families &support the Bank of England in lowering inflation; and in the interest of growth make tax changes that improve the system overall. There is more than one way to skin this particular cat & we won’t know until we see the whole package whether she has achieved these 3 objectives. Much depends on the forecasts from the OBR. A significant economic deterioration would leave the Chancellor choosing whether to break the spirit or letter of her manifesto pledge on Income Tax. A more benign economic outlook will make it far easier to avoid breaking it at all. It is normal for economic forecasts &policies to change in the run up to the Budget. It is not normal for so much of that to be laid bare in public. The market moves this morning &in recent weeks suggest a serious look should be taken at
Excessive levels of Budget kite-flying risk exacerbating market uncertainty
@ruthcurtice.bsky.social responds to latest rumours that the Chancellor is no longer planning to increase Income Tax rates in her upcoming Budget, following rumours last week that this would be the centrepiece of the Budget
How the bond markets appear to be reading the latest budget u-turn.
Labour can’t cut spending (welfare u-turn)
Can’t raise major broad based taxes (income tax u-turn)
Reeves and Starmer are hostage to the backbenchers. Like the drunken sailors have taken command of the ship
There is recent precedent. Last October the OBR added 0.25ppts to its rates forecast to anticipate the inflationary impact of the budget on markets www.bloomberg.com/news/article...
eeves has asked the OBR to score her plan to lower inflation by tackling regulated prices. It could knock up to £6bn off borrowing costs - fully offsetting the increase since March, Bloomberg Economics work shows, helping to fill the £30bn hole.
www.bloomberg.com/news/article...
BoE gov Bailey lending the government a hand. Brexit will be a drag on growth for the “foreseeable future,” he says. Reeves needs growth, Thomas-Symonds is negotiating better trade with the EU, and Bailey helpfully points out the reward on offer.
www.bloomberg.com/news/article...
There is an OBR growth downgrade coming but she’ll pin that on Tory austerity and Brexit for hammering productivity 7/
www.bloomberg.com/news/article...
The ambition is to increase the headroom from £9.9bn alongside move to one OBR assessment, to restore policy stability and reassure markets 6/
www.bloomberg.com/news/article...
She wants to lower inflation via regulated prices, to help bring down borrowing costs which have been the “fastest rising item of gov spending,” she told C4 5/
www.bloomberg.com/news/article...
Welfare cuts will be found, which could restore some of the government’s lost credibility with markets since the damaging u-turn. The Times reported that £1bn may be saved from Motability benefits 4/
www.bloomberg.com/news/article...
She looks likely to give business a reprieve from more tax rises in a bid to make the budget “pro-growth” 3/
www.bloomberg.com/news/article...
She seems reluctant personally to do a bank tax but it remains on the table 2/
www.bloomberg.com/news/article...
Reeves gave a series of interviews at the IMF setting out the broad shape of her budget. Key things: tax rises coming, certainly on wealth 1/
www.bloomberg.com/news/article...
Chart showing Proportion of real terms increase in typical household dual fuel energy bill from 2015 to 2025, by component: GB
Wholesale energy costs aren't the *sole* driver of higher energy bills.
For electricity, the largest source of upwards pressure comes from increasing costs of government policies and schemes funded through bills.
Read 'Splitting the bill' to learn more 👉 buff.ly/4x4GNAa
Chart showing Nominal main rate of Fuel Duty per litre under different scenarios
The value of Fuel Duty is now at historic lows, having fallen by 23p per litre (or a third) in real terms over the past decade.
It would cost £5 billion *per year* to continue the freeze by the end of the decade.
Instead, smaller quarterly increases should be introduced.
IMF has urged Reeves to stick with two OBR forecasts a year. But only judge her once. It's not plausible. The Act states the OBR has to do two forecasts and assess her both times. Reeves says she wants one proper forecast. That will require legislation
www.legislation.gov.uk/ukpga/2011/4...
