NEW from @jrf_uk.

Much has been made of the pressure on public finances.

Household finances remain the elephant in the room.

If OBR adjust their Mar forecast in line with the BoE in Feb, it will see the average family £1,400/yr worse off by 2030, compared with today.

Thread. The main drivers are threefold.

1. Interest rates are high (up from October), reducing employment, constraining earnings, and feeding through to higher housing costs.

2. Inflation (also up) outstripping earnings growth.

3. Frozen tax thresholds sees % tax in earnings rise.

NEW microsimulation modelling from @jrf_uk.

Following #Budget2024 and the latest OBR forecasts, we find average disposable incomes are now set to fall across the parliament.

By October 2029, the average family is set to be £770/yr worse off in real terms compared with today. 1/ Looking beneath the bonnet gives a sense of what's going on.

Real earnings growth is set to slow, and is being soaked up by rising housing costs (both mortgages and rents) and continued 'fiscal drag' (tax thresholds failing to rise with inflation). 2/

This week, 'core' inflation overtook headline inflation for the first time in two years.

We should expect attention to increasingly shift to this measure in the coming weeks & months.

But why, & what does it mean?

Thread. The Bank of England has a target for the headline rate of inflation, as measured by the consumer price index (CPI).

The target is 2%. CPI has been well above this target for some time, but is now on its way back down.

Two in five families (30.6 milion people) will be unable to afford a decent standard of living by the next election, a rise of 8.9 million since the last election.

Today, @NEF is launching proposals to replace universal credit with a new national living income.

Quick thread 1/ Pandemic & war have brutally exposed the fragility of UK social security.

The system had to be temporarilly reinvent from scratch twice in 18 months, first with the furlough scheme & again with the energy price guarentee - all at an eye watering social & economic cost. 2/

Important that journalists call out the falling £ and rising cost of government borrowing for what it is:

An "incompetency premium".

Quick 🧵 How do we know this?

Government borrowing is reflationary, resulting in high interest rates, which all else equal should put *upwards* pressure on £.

This makes the recent movement all the more remarkable.

While Truss' tax cuts will widen inequality & do little to protect families where it is needed most, freezing energy bills at April 2022 levels could be the first time government has provided a response that measures up to the scale of this crisis. But at a similar cost over a year to running the NHS in England, it is an emergency measure that cannot last more than a few months.

The time bought from a price freeze must be used to put in place more lasting solutions.

Winter is coming, but we need to think to what's coming next.

By Apr 2023, even after accounting for wage growth & benefit uprating, annual family costs are set to grow £3,100 faster than incomes on average since April 2021

New @NEF research out today, including solutions 1/🧵 This crisis will be measured in years rather than months.

Typical direct debit bills are rising above £3,500 this Oct, but they are set to nearly double by the spring & remain close to £6,000 for the rest of 2023. 2/

*THREAD*

Are higher minimum wages & more paid holiday key to fixing the UK's productivity puzzle?

Brand new @NEF research out today, covered by @RJPartington in @guardian and welcomed by @johnmcdonnellMP and @geofftily @The_TUC shows they are... 1/18 theguardian.com/business/2019/… High productivity (amount produced per time spent working) is a key ingredient for an economy that works for people, society & planet.

1) Alongside good labour regulation, high productivity is an enabler of good pay for workers & closely correlated with earnings across time 2/18

Today's @OBR_UK 'Fiscal risks report' is in headlines for its Brexit 'stress test'. But it also happens to include their first attempt at climate analysis.

Although a welcome move, the bigger picture is the OBR has got things the wrong way around 1/11

obr.uk/frr/fiscal-ris… By 'fiscal risks', OBR tends to mean things that may increase public borrowing. But this ignores a key point: public balance sheets are there to absorb risk. They are there to *assume*, not avoid, risks that would otherwise cause more harm if left to fall on families & firms 2/11

New @NEF analysis out today shows effects of austerity since 2010 have had standalone effect of making economy £100bn smaller per year, £3600 per family

Rarely has sustained, deliberate action by a UK government caused so much harm to its own country 1/13
neweconomics.org/2019/02/auster… Today’s public sector finance release will likely show we’re on course for the smallest government deficit – difference between public spending and revenue – since 2001. What they don’t show is the economic damage it has caused to get here. 2/13 ons.gov.uk/economy/govern…

Yesterday a think tank policy director told me live on radio that working people shouldn't have to pay for children in families on benefits.

Their view is either staggeringly ignorant of the basics of tax & welfare policy or else guilty of the worst kind of political motive. 1/4 1. Whether in or out of work, we all pay tax. Income tax & NICs are worth just 1/3 of the tax base. Billions of £s are paid in VAT/council tax/fuel duty by people out of work every single year.