Institute for Fiscal Studies Profile picture
Oct 11, 2022 8 tweets 5 min read Read on X
Chancellor @KwasiKwarteng has promised a 'fully costed plan to get debt falling in the medium-term’.

But stabilising debt as a fraction of national income in 2026–27 would require a fiscal tightening of around £60bn on @Citibank’s central forecast.

[#IFSGreenBudget THREAD: 1/8]
Debt in our central forecast with @Citibank continues to rise throughout the forecast horizon, even once the big packages of support for rising energy prices are assumed to have expired.

[2/8] Chart shows forecast underlying public sector net debt. Titl
Even once these support packages expire, tax cuts and a weak economic outlook would keep borrowing high.

While there’s uncertainty around the scale, under a central forecast in 2026–27 we expect borrowing of around £100bn, around £70bn higher than forecast in March.

[3/8] Chart shows forecast borrowing. Title states: "Large pe
We forecast spending on debt interest will be around £100bn next year, double @OBR_UK's March forecast (itself already an £13bn upwards revision).

This increase would partly dissipate if inflation falls back, but higher interest rates & debt levels will push up spending.

[4/8] Chart shows spending on debt interest in £ billion. Title s
Rising inflation is eating into departmental spending plans set out a year ago, but the government has stated that it will leave them unchanged despite rising pressures.

Making big additional cuts to already squeezed departments to stabilise debt would be far from easy.

[5/8]
More growth would reduce the scale of fiscal tightening needed to stabilise debt.

But even if growth turned out to be 0.25 percentage points a year stronger than @Citibank expects, a fiscal tightening of around £40bn would be required to stabilise debt by 2026-27.

[6/8] Chart shows the trade-off between changes to taxes/benefits
The renewed focus on growth is welcome, but @OBR_UK has not historically incorporated hoped-for growth improvements into forecasts without concrete evidence of stronger growth.

Plans which rely on an unlikely uptick in growth are unlikely to impress financial markets.

[7/8]
“The Chancellor should not rely on over-optimistic growth forecasts or promises of unspecified spending cuts. To do so would risk his plans lacking the credibility which recent events have shown to be so important.”

Read our #IFSGreenBudget chapter> ifs.org.uk/publications/o…
[8/8] Quote from IFS Director Paul Johnson: "The UK governmen

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with Institute for Fiscal Studies

Institute for Fiscal Studies Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @TheIFS

Apr 1
NEW: Reforms are needed to help people make good use of their pension wealth throughout their retirement and avoid exhausting their wealth too early.

New Pensions Review reports funded by @finan_fairness look at the rising numbers making complex, risky decisions in retirement:🧵 Image
@finan_fairness People are increasingly saving for retirement in defined contribution (DC) pensions, which do not guarantee a regular income.

44% of those aged 55-64 had some DC pension wealth in 2006-07, rising to 59% in 2021-23. The average size of DC wealth at retirement is also growing. Chart shows share of 55- to 64-year-olds with defined contribution pension wealth. Title states: "A growing number of people are reaching retirement with defined contribution (DC) pension wealth."
@finan_fairness Median DC pension wealth at retirement (among those with some) is set to rise from £75k for those born in 1960-64 to £130k for those born in 1975-79.

Since 'pension freedoms' were introduced in 2015, over-55s have been able to access DC pensions any way they choose. Chart shows projected median and 75th percentile DC pension wealth at retirement among those with some DC wealth, by birth cohort. Title states: "Median defined contribution pension wealth (among those with some DC wealth) set to rise substantially."
Read 8 tweets
Oct 23, 2024
NEW: Access to Sure Start as a child reduced the likelihood of ending up in youth custody by a fifth.

THREAD on our new report, funded by @NuffieldFound, on Sure Start’s impact on crime and social care outcomes: [1/9]

ifs.org.uk/publications/e…
Established 25 years ago, Sure Start operated as a network of centres integrating services for families with young children under one roof, before being wound back since its peak in 2010.

Previous IFS work found it improved young people’s health and educational outcomes.

[2/9]
Access to a Sure Start centre during the early years reduced the probability of receiving a criminal conviction by 13%, and a custodial sentence in adolescence by 20%.

It did not have a major effect on less serious criminal outcomes: there was no effect on police cautions. [3/9] Chart shows effect of growing up near Sure Start on crime up to age 16, by percentage change in offending rates. Title states: "Living near a Sure Start centre before age 5 significantly reduced youth convictions and custodial sentences."
Read 9 tweets
Sep 27, 2024
NEW: Public sector pay has declined relative to the wider pay distribution, especially for higher earners.

@JCribbEcon @awmckendrick @m_dominguezp’s Green Budget chapter examines the pressures on public sector pay and the implications for recruitment & retention:

[THREAD: 1/11] Image
The new government has accepted in full the independent 2024 Pay Review Body recommendations, with average pay rises of 5.5%.

This is ahead of inflation, and close to private sector pay growth.

[2/11]
Pay in the public sector has evolved less favorably than in the private sector in recent years.

While private sector pay is 6% higher than it was in early 2019 in real terms, public sector pay is up by only 1%.

[3/11] Image
Read 11 tweets
Sep 19, 2024
NEW: Health-related benefit claims have risen substantially across England and Wales, with increases in mental health claims across all ages.

There is little evidence of similar trends in other countries.

THREAD on our new report on health-related benefits:

[1/7] Chart shows share of working-age population claiming selected health-related benefits: selected countries (indexed to 2019). Title states: "The rapid growth in health-related benefits seems to be largely a UK phenomenon."
There has been rapid growth in the health-related benefits caseload since 2019. 1 in 10 working-age people in England & Wales now claim a health-related benefit.

@OBR_UK projects further growth of 19% for incapacity benefits & 41% for disability benefits from 2023 to 2028. [2/7] Chart shows share of working-age population claiming health-related benefits. Title states: "The caseload for incapacity benefits has grown by 28% since 2019–20, and the disability benefits caseload by 39%."
A higher caseload means higher spending. The UK now spends 1.7% of GDP on working-age health-related benefits.

This is up from 1.3% in 2019 but is still close to the OECD’s 2019 average of 1.6%. However, @OBR_UK forecasts that spending could rise to 2.1% of GDP by 2028.

[3/7] Chart shows sickness and disability benefits cash spending as a share of GDP: OECD countries (2019) and UK (2019, 2023, 2028). Title states: "Despite recent increases, the UK’s spending on working-age health-related benefits is still similar as a share of GDP to other comparable countries."
Read 7 tweets
Jul 25, 2024
NEW: Rising mortgage interest rates pushed 320,000 into poverty by December 2023, but only two-thirds of that will be captured by official statistics.

THREAD on Sam Ray-Chaudhuri, @TomWatersEcon & Tom Wernham’s @JRF_uk-funded living standards, poverty & inequality report:

[1/7] Charts show mortgagor absolute poverty rate (after deducting housing costs), under alternative interest rates. Title states: "Higher mortgage interest payments pushed 320,000 mortgagors into poverty by December 2023."
Mortgage interest rates have risen rapidly since June 2022.

These increases have not impacted all mortgagors, but those whose fixed period ended recently have faced much higher interest rates, which can increase payments by thousands of pounds per year.

[2/7] Chart shows average interest rate on new loans/remortgages (weighted by loan value). Title states: "Average mortgage interest rates for re-mortgagors had risen to more than 5% by December 2023."
Higher mortgage interest rates have caused poverty among mortgagors to rise from 7.9% to 9.3%, equivalent to 320,000 more people.

Official statistics use average interest rates to calculate mortgage payments, and so will only capture two-thirds (230,000) of this rise.

[3/7] Chart shows mortgagor absolute poverty rate (after deducting housing costs), under alternative interest rates. Title states: "Higher mortgage interest payments pushed 320,000 mortgagors into poverty by December 2023."
Read 7 tweets
Jun 24, 2024
STARTING NOW: @PJTheEconomist opens our IFS event analysing the 2024 General Election manifestos:

📺 Watch live here:

Ask questions here:
app.sli.do/event/9esN5Dd8…
- @PJTheEconomist: The "raw facts" on the public finances and funding for public services "are largely ignored by the two main parties in their manifestos."

"They have singularly failed even to acknowledge some of the most important issues and choices."
@PJTheEconomist Low growth, high debt and high interest payments means "to stop debt spiralling ever upwards we need to run primary surpluses."

"That means the government collecting more in tax and other revenues than it spends on everything apart from debt interest."

- @PJTheEconomist
Read 15 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

:(