Julian Jessop Profile picture
Independent economist. Likes charts. IEA Economics Fellow. Schools speaker. Fellow of Royal Society of Arts. Pro-Brexit. Gooner. Own views, etc. Bio on website.
Mar 27 8 tweets 4 min read
FYI, Richard Hughes (Chair of the #OBR) did *not* say yesterday that #Brexit has (already) shrunk the UK economy by 4%.

Instead, he repeated the OBR’s estimate that it will reduce long-run productivity by 4%, which is still just an *assumption*.

This needs some explaining… 🧵 The 4% focuses on the negative impact of a fall in trade, assuming both exports and imports are 15% lower in the long run (c.15 years) than if the UK had remained in the EU.

The evidence to date has not been enough to change the OBR’s mind, but it is far too soon to be sure…
Jan 28 5 tweets 2 min read
FWIW, here are my three takeaways from #JeremyHunt's interview in the Times:

1. Welcome emphasis on encouraging over-50s back to work. This is long overdue, and will need more than just exhortations and gimmicky 'MOT' schemes, but he seems to get this...

thetimes.co.uk/article/jeremy… 2. 'Putting sound money before Tory ideology' is a good line: if badly done, tax cuts could keep #inflation high and add to pressure on interest rates.

But still wrong to rule them out: well-targeted cuts could help with both demand and supply, boosting growth without inflation.
Dec 23, 2022 4 tweets 3 min read
Since #food prices are in the news again, here are three charts comparing the UK and the rest of Europe.

(Spoiler alert: it's no consolation, but food price inflation is even higher in the EU than in #BrexitBritain)

1. What's happened to food prices (in levels) since 2016... 2. Cumulative #food price #inflation since December 2019...
Dec 1, 2022 5 tweets 3 min read
Four quick points on the latest stories about #Brexit's impact on UK #food price #inflation...

1. This is not news: the original research by the same authors was first published (by UKICE) back in April, and the Guardian etc even wrote it up at the time!

theguardian.com/politics/2022/… 2. These reports claim that new non-tariff barriers (NTBs) added 6% to UK #food prices in the two years to end 2021. But this number is based on hypothetical costs and modelling, not actual data on NTBs. (Recall that the UK has not imposed full checks on imports from the EU.)
Nov 15, 2022 4 tweets 3 min read
Mixed bag of UK labour market data... (short 🧵)

#Unemployment rate down on the quarter but up on the month, and flattered by rise in number of people no longer actively looking for work (incl. long-term sick)

#Employment rate (first chart 👇) still below pre-Covid levels... Earnings data a little better than expected: average total #pay (incl. bonuses) rose 6.0% in 3m to September and regular pay (excl. bonuses) by 5.7%, although still falling in real terms.

And early PAYE estimates for October point to a 6.0% increase in median pay last month...
Oct 3, 2022 4 tweets 2 min read
A bit of myth busting... the #BoE hasn't spent £65 billion to prop up the economy / bail out pension funds / save #KwasiKwarteng (or any variation)...

Instead, it has said it will buy gilts in 13 daily auctions, with a limit of £5bn each day.

Today it did just £22 *million*... The aim of this policy is to cap gilt yields by signalling that the Bank will act as the buyer of last resort to prevent forced sales by pension funds from driving yields even higher.

If this signal is credible, the Bank will not actually have to buy anywhere near £65 billion.,,
Oct 2, 2022 15 tweets 4 min read
A 🧵on #benefits

#KwasiKwarteng’s reluctance to confirm that benefits will be uprated in line with #inflation has fed speculation that the government is considering a real-terms cut.

I’m going to explore this further, but at first sight it looks like a very bad idea... To recap, benefits are usually uprated in April in line with the CPI measure of inflation recorded in the previous September. This meant that benefits rose by just 3.1% in April this year (the inflation rate in September 2021), well below actual inflation of 9.0% in April itself.
Sep 28, 2022 8 tweets 4 min read
Thoughts on the #BankofEngland intervention… 🧵

The Bank will carry out *temporary* purchases of long-dated UK government bonds from 28 Sep to 14 Oct to stabilise the market.

The purchases ‘will be carried out on whatever scale is necessary’, but are *strictly time-limited*… At the same time, the #MPC is pausing the start of active #QT (i.e. selling bonds bought under #QE) until 31 Oct.

This might be reviewed depending on economic and market conditions, but the annual target of £80bn of sales is unchanged, so this is a delay rather than a U-turn...
Sep 24, 2022 16 tweets 7 min read
Reflections on the morning after - and especially the markets… 🧵

It may well take some time for the dust to settle on #KwasiKwarteng’s first #Budget (yes, 'Budget’: if it looks like a duck, walks like a duck and quacks like a duck, then it’s fair to call it a duck)... The initial reaction from most economic commentators and in the financial markets has been a loud boo! There are some things I would have done differently. But the overall strategy is sound, and sentiment should recover as the economic benefits become clearer...
Sep 6, 2022 10 tweets 3 min read
Some thoughts on the proposed #energy bill freeze... 🧵

Based on media reports, the idea is to cap the unit cost of energy by subsidising suppliers so that they do not have to pass on higher wholesale prices in full, either to households or to businesses… (1/10)

#energycrisis On the plus side, this would lift the huge cloud of uncertainty which is now hanging over the whole economy. The peak in #inflation would also be much lower.

With this plan in place, the new government can score a big 'win' and quickly move on to other priorities... (2/10)
Aug 11, 2022 5 tweets 2 min read
A few features of the #energy market that Gordon Brown (and his many fans here) don't seem to understand... 🙄

1. Energy suppliers are not the ones making big profits. None of his ideas - including #nationalisation - would reduce the prices they have to pay in global markets. 2. The Ofgem price cap is already based on an assessment of the ‘actual costs’ of supplying energy, including a small profit margin. As such, the cap already forces suppliers to ‘keep prices down’...
Jun 9, 2022 5 tweets 2 min read
A quick 🧵 on the potential economic impact of the rail strikes.

In short, not a game-changer, but certainly another blow the UK could do without... 🙄 (1/5)

#RailStrikes Unions must give warning, so there is some time to make alternative plans.

The series of 1-day #strikes (Tue 21, Thur 23, Sat 25) might be less disruptive than a single, prolonged stoppage, because some customers may be able to reschedule their use during the breaks... (2/5)
Mar 22, 2022 4 tweets 2 min read
The UK government borrowed about £5bn more than expected in February, as higher debt interest costs offset a rise in tax revenues.

But favourable revisions to past months mean that borrowing is still on track to undershoot the OBR forecast for FY 2021-22 by about £24bn... (1/4) Looking forward, rising #inflation will keep debt servicing costs high. But OBR analysis (Box 3.2 Oct EFO) has already shown that an inflation shock is likely to reduce borrowing overall, thanks to the boost to revenues, even with much larger hikes in interest rates... (2/4)
Jan 14, 2022 10 tweets 4 min read
Just updated my UK #GDP forecasts with today's data... 🤓🧵

Some key points and international comparisons

1. UK economic growth in 2021 is likely to be just shy of 7½%, 1% higher than assumed in the October Budget and 3% higher than the consensus at the start of last year... 👍 2. This means that the UK was almost certainly the fastest growing G7 economy in 2021.

Many like to dismiss this as a 'dead cat bounce' after the relatively large fall in 2020. But the UK still did much better than expected, even taking account of this favourable base effect...
Jun 11, 2021 6 tweets 2 min read
Some more thoughts on the economics of delaying #FreedomDay (please read the whole thread before shouting at me!).

Keeping the remaining Covid restrictions for a few weeks longer would be unlikely to derail the recovery, but could still have some significant impacts… (1/6) The sectors that are still severely restricted account for less than 5% of GDP, and most are already open to some degree.

Money not spent in pubs or nightclubs (or holidays abroad) can also still be spent elsewhere in the UK economy... (2/6)
Jun 11, 2021 6 tweets 4 min read
A bit more on today's UK trade data and the impact of #Brexit...

It helps to look at #imports and #exports *separately* - the stories are quite different.

The relative weakness of UK trade with the EU is mainly on the *import* side, which is only partly Brexit related... (1/6) A lot is also due to problems in the car sector (e.g. global shortages of parts) and the relative weakness of demand for cars, which we mainly import from the EU, compared to goods we import from the rest of the world (e.g. clothing & PPE from Asia)... (2/6)
Dec 23, 2020 14 tweets 8 min read
📢 thread: 12 reasons to be cheerful about the UK #economy in 2021🎄

I know 2021 will be another tough year for many people and businesses, but I’m aiming here to provide some counterbalance to the more negative commentary you can easily find elsewhere... 1. The household sector (in aggregate) has built up substantial #savings during the pandemic that could be used to fuel a strong recovery in #consumer spending. Obviously, the distribution is uneven and much still depends on confidence. But…
Dec 3, 2020 12 tweets 4 min read
FWIW, I’m relatively relaxed about the fiscal costs of #Covid: borrowing will drop sharply as the economy recovers, the #debt burden is manageable, and there’s no need for #austerity to pay for it.

But this isn’t a green light to abandon fiscal responsibility altogether… (1/12) For a start, the long-term outlook is more worrying.

The #OBR’s Fiscal Sustainability Report (July) includes scenarios where unchecked increases in public spending on health, adult social care and pensions could see debt balloon to more than 400% of GDP in 2070... (2/12)
Nov 28, 2020 19 tweets 4 min read
I’ve read some utter tosh on the state of the UK public finances in the last few days. Here's an attempt to correct some of the biggest misunderstandings.

Most importantly, government debt does not have to be ‘repaid’, only serviced... (1/19)

#SR20 #SpendingReview #RishiSunak As long as the government can meet the interest payments (I’ll discuss the risks here later), maturing debt can simply be rolled over. (2/19)
Nov 27, 2020 8 tweets 5 min read
FWIW, I’ve been comparing my UK economic forecasts with those of the #OBR. There is a much more positive story than the Chancellor told in Wednesday’s #SpendingReview #SR20 📢

Let’s start with the near-term outlook… (1/8) The #OBR assumes that the economic impact of #lockdown2 will be ‘three-fifths’ that seen during the first lockdown, when #GDP fell by 25% in March and April. This means that lockdown2 would take the level of #GDP back to 15% below its pre-Covid peak… (2/8)
Mar 14, 2020 7 tweets 4 min read
I see some are arguing that the economic hit from #coronavirus means we should now extend the #brexit transition period (or even #rejoinEU 🙄). They typically make up to four points – but none of them seem at all convincing… (1/6) First, that it's now much harder for UK and EU negotiators to travel and meet in person. But so what? This is the age of video conferencing and the internet, and we can surely work around this... (2/6)