Have you been involved in past spending reviews in the UK (any level of seniority, in/out of HMT) and have views on what works and what should change?
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All in confidence - no names or quotes published w/o explicit consent.
Keep tweeting then deleting about this because worry I’m over egging it but will just say
@hmtreasury
pushing this stuff out with no mention of larger income tax rises is really dishonest
Meet Michael, an average earner in the UK.
Michael now earns an extra £450 take home pay as a result of today's tax cuts.
Want to find out how much YOU could save?
Click below 👇
“Fudge the numbers so it looks like our policies make sense or we’ll get rid of you”
What a way to restore confidence in UK economic credibility
Astonished this has come from a Cab minister. Awful. Really really bloody awful.
On
#peston
tonight,
@Jacob_Rees_Mogg
says that if
@OBR_UK
does not - in Kwarteng's medium term fiscal plan on 31 Oct - show government debt falling after 5 years, other forecasters are available. Mogg: "Its [the OBR's] record of forecasting is not enormously good. So...
Unclear whether this is being briefed with Sunak's approval (very worrying if so) but the argument is absurd. "Dire warnings about living standards" are not policy judgements... they are and always have been part of the economic forecasting process 1/
Listening to a politics correspondent on
@BBCr4today
saying ministers having to look for cost of living measures that don’t cost anything because there’s ‘no money left’
Sorry but not true - borrowing in this situation is a political choice. Fair to criticise, but still a choice
I do hope we get to see the "Treasury analysis" behind this headline less than a year a go as well as the "Treasury analysis" suggesting the same policy, when announced by the chancellor, will instead raise nearly 3bn
Perhaps too late but here comes a thread on what we thought went wrong with Covid decision making - in Sunak's Treasury and elsewhere - because it seems v poorly understood.
A good pandemic policy is not one that pits health vs economy - it is not a simple tradeoff...
HMT officials have had 4 working weeks since Autumn Statement and now preparations for Budget begin
A government committed to developing good, strategic, long-term policy would commit to one fiscal event so officials aren't constantly being asked to produce the next hat rabbits
The Chancellor
@Jeremy_Hunt
has commissioned the
@OBR_UK
to prepare an economic and fiscal forecast to be presented to
@UKParliament
alongside his Spring Budget on 6th March 2024.
Not advocating... but there is space in our politics for more argument about
- investing before growth, not other way around
- slow-burn crises like net zero needing fiscal response like covid
- raising revenue (w reform)
Current debate is so unhealthy, unevidenced, tiring
1/2
Very pleased at this. Since the Prime Minister introduced the super deduction, the forerunner to full expensing, we've had the second highest investment growth in the G7, and three times that of the US (despite some very muscular subsidies on offer from our friends across the…
Calling into question the OBR's credibility bc their forecasts are unhelpful for gov is unwelcome - hope this was briefed without Sunak's approval.
Otherwise it is a worrying reflection of this gov's allergy to scrutiny & an unfounded attack on important UK institution
Please get the very good economics correspondents on to discuss this stuff.
‘There’s no money left’ is the political position of the current government, not an accurate description of the state of public finances
try to avoid posting personal views outside of the job but as member of said LGBT community the notion that the government (and most others in westminster politics) are "taking the heat out of the debate" is astonishing and obviously untrue
As Minister for Women and Equalities I've done all I can to ensure we have take the heat out of the debate on LGBT issues while being clear about our beliefs and principles.
Keir Starmer’s behaviour today shows Labour are happy to weaponise this issue when it suits them (2/2)
No I'm being too polite - the scale of these tax cuts with
- no financing plan
- no official forecast from the OBR
is EXTREMELY IRRESPONSIBLE. I don't see how taking such big risks with the public finances will turn out to be anything other than a huge mistake
This many tax cuts without an OBR forecast is extremely risky.
Frankly no idea how HM Treasury officials would sign off on this - don't understand how people that lend the UK money can be confident in the sustainability of our public finances.
A wonderful column by
@gemmatetlow
in the
@FT
on what past few weeks should teach the govt… those of us who argue for the importance of rules, process, institutions have been given a v good case study of what happens when they are ignored…
The 6 deadly sins of fiscal policy-making (and what to do about them):
1. Fiscal fiction: gvts meet fiscal rules by penciling in unrealistic policies
2. Gaming: meeting the letter but not the spirit of fiscal rules e.g. selling off assets... 1/8
It literally can not - according to legislation - ever make policy judgement but merely provides an objective assessment of their economic impact. The fact that policies are not going to offset the fall in real wages reflects Chancellor's choice, not the OBR's opinion 5/
The OBR has consistently demonstrated its value - producing some of the most accurate forecasts (much less biased than the ones HMT used to produce) and bringing transparency & clarity to assessment of the UK economy & public finances 3/
Give me strength… cuts already pencilled are severe… and of course the government hasn’t spelt out where the axe will fall.. and will bet any amount they wouldn’t do so for further cuts at budget
What’s the point in the fiscal rule if you can fuel tax cuts with fantasies
If transmission of the virus is high and growing exponentially, people will be afraid to go out and reduce consumption even if no lockdown. Some will also die and - even if you only care about the economy - that's not good because they won't work
This is not on
- spend whole campaign berating HMT
- v clearly sideline HMT/OBR and ignore advice in designing policy
- go ahead with implementing policy
- cause financial crisis
- blame it on the people who you berated and refused to listen to
Liz Truss was frustrated by Treasury's failure to anticipate scale of market turmoil and manage stakeholders ahead of budget
Allies say this is not a criticism of Kwarteng but of institution
Senior figures in No 10 vented anger at being 'blindsided'
Nor is stating the face that tax rises under Sunak have been larger than cuts - or that taxes are going up as a share of GDP. The Chancellor will have known this was the case when designing policy - HMT officials will have made similar calculations when giving advice 2/
The OBR is recognised internationally as the gold standard for intl fiscal institutions - "it has achieved the goal of reducing bias in... forecasts. Stakeholders widely praise the OBR for bringing greater fiscal transparency" 4/
Ridiculous. For public services facing huge pressure and backlogs, with their budgets from the October Spending Review already significantly reduced due to inflation, “efficiency savings” probably don’t exist.
Instead, cuts will lead to (even) worse public services.
Exc: Whitehall to be told to find efficiency savings as well as refusing to reopen spending review
Chris Philp to write to Secretaries of State within hours
"What efficiency savings are there given levels of inflation??! Amazing bulls***" said a Whitehall source
So you want to be in control of the virus in order to help the economy. This is a pretty simple observation once you get your head around the basic relationship between economic activity and the exponential dynamics of disease transmission
He should have been working hard with his colleagues to produce the analysis of what optimal policy looked like. Instead it seems like focus was on making the strongest possible case against restrictions without thinking whether that was best - for economy or wider society
On the QALY cost-benefit analysis paper by Miles and others that Sunak referenced in his hearing yesterday - this is what we said about it in our report in April. The fact that Sunak referenced this reinforces our suspicion that he misunderstood economy-health interactions.
Others have made this point but QALYs (which the QC gets wrong) are literally how you measure the merit of all public health interventions, whether to approve certain drugs etc. This whole inquiry increasingly feels like arts students being asked to write a science thesis.
But what TRULY drives bad economic outcomes is high disease prevalence - it has an impact either via triggering government interventions or making people fearful.
If "cut taxes, deregulate" was the magic sauce for GDP growth we would live in a world defined by the absence of government. We don't. And plenty of countries that outperform has have higher taxes... It's much more complicated...
To say to Sunak "well you're right to be pointing out the economic costs" in central government decisions is to let him off the hook: it is based on a rudimentary analysis of correlations without deep thinking about causality
What actually happened inside government did not reflect this. It is because we have an adversarial style of decision-making and little in the way of institutional mechanisms to support collaborative analysis
It is hard to perfectly calibrate policy but the basic intuition is there. And to control the virus - again because of exponential dynamics - you want to go hard and early - avoiding need for costlier interventions later down the line
Welcome the the UK, where the budget is balanced with dreams and magic beans. Chancellors spin fairy tales about meeting fiscal rules. Sure, it's fun, but nothing's getting done. We need to leave fiscal Neverland.
New blog (+ report next week)
I wish so much that we had got into why this was the case in the oral hearing for both Sunak and his officials but we did not. Instead the questioning seemed to assume that Sunak was right to be constantly pointing out short-term economic costs - but what about long run?
Always wondered whether we make too much of fiscal policy churn and the same thing happens elsewhere as inevitable consequence of political impulses
So looked at the data... and...
What does reshuffle mean for UK industrial strategy?
This v gd article
@DianeCoyle1859
says the UK's difficulty with Industrial policy is down to flaws in policymaking process not obviously solved just by MoG changes
What are lessons for new depts?
This many tax cuts without an OBR forecast is extremely risky.
Frankly no idea how HM Treasury officials would sign off on this - don't understand how people that lend the UK money can be confident in the sustainability of our public finances.
How did the Treasury respond to the pandemic? Our new
@instituteforgov
report finds:
- excelled in its economic policy response
- BUT secrecy and inclination towards tactical sharing of information contributed to decision-making becoming a tug of war 🧵
New from
@instituteforgov
Whitehall Monitor 2024: senior Treasury civil servants could at least double their salary by moving to a similar 𝗽𝘂𝗯𝗹𝗶𝗰 𝘀𝗲𝗰𝘁𝗼𝗿 role in Bank of England or FCA.
Gaps with private sector much wider. How did we get here?..
It seems - from unpublished advice released by the inquiry and everything in the public domain - that Sunak's officials largely produced the simple descriptive analysis that suggests lockdowns are bad without thinking deeply about the cause
Even the most ardent supporters of fiscal sustainability would say the the above are as/more important than meeting your fiscal rule(s)
Fiscal rules are currently dictating strategies. They should instead sit underneath broader strategy
2/2
Of course, not HMT/Sunak's responsibility alone to ensure people were collaborating to produce the best analysis. But they undermined it: see emails from his private secretary talking about how HMT had more information than others in the room. It's not a competition guys!!!
OBR was established to constrain chancellors' optimism about how much their policies will boost growth.
Now, Kwarteng will announce on huge borrowing & permanent tax cuts, banking on a risky growth 'plan' for finance
He risks destroying his credibility🧵
This narrative is frustrating.
OBR exists so that the forecasts are less biased than when produced by HMT (which they are).
If problem is that forecasts have too much influence - maybe a legitimate complaint - the problem is how govt weighs up fiscal choices, not OBR itself
Madness.
So Chancellor has to get approval for economic policy from an unelected, unaccountable quango with a dodgy forecasting record?
As we have seen, the creeping power of the OBR is alarming: HMT now doesn’t even produce its own forecasts, just defers to the OBR.
£36bn is lifetime cost of hs2 phase 2A/2b & East … the leaked table seemed to suggest there were savings of £6-£8bn within the scorecard - key question is the new spending within the scorecard? If it’s not then it frees up headroom for tax cuts…
So we had those arguing for restrictions, those arguing against. This was pretty constant. HMT in particular would produce charts showing how GDP falls as restrictions are implemented, which led to a fairly simple "lockdown bad" position that was maintained
"Taxpayers do not pay for civil servants to lie to us via the media. The prime minister may not accept that. But the cabinet secretary should make clear that he does."
-
@jillongovt
on great form as ever
lies, damned lies and the No.10 press office.. we don't pay govt press officers to tell us fibs to protect their master. And Simon case should stop it. Me for
@instituteforgov
This. Fantastic the government's going for growth and willing to try difficult things. We're certainly not anti-growth.
But provide an evidence base! Surely that can't be controversial - or an "orthodox" take. Figure out what things are going to work before you do the things...
There hasn’t actually been a report or document by Treasury, No 10 or Cabinet Office identifying
- what the growth deficit has been.
- why it occurred here, and perhaps didnt occur elsewhere
- and therefore how it should be addressed, and if eg tax if the biggest single barrier
I think friend working in (what was) BEIS has now worked in 4 different departments without actually changing job... mogged around from BERR to BIS to BEIS to DBT
Sunak citing a paper on debt that was rubbished, for many reasons incl basic spreadsheet errors. Surely someone who has received advice from HMT economists for 2 years should know better.
I guess should be grateful he’s citing evidence at all. That’s a v low bar though.
can see why Hunt didn't mention real household disposable income (main measure of living standards) in the speech
a devastating picture for living standards for which there is no meaningful comparison in recent history
It's the belief that gets me. Belief that the tax cuts would pay for themselves at least once over
Holding this belief despite no gd evidence supporting it
Making policy that hugely affects wellbeing of 70mn people on the basis of... belief... & belief not supported by evidence
Terrible framing from
@BBCNews
- a couple days ago they published report criticizing prev economic coverage for being exactly like this...
"A tax advisor said" is not equivalent evidence to the type of detailed analysis
@arunadvaniecon
et al have been producing... come on guys
Strange headline
@BBCNews
, which doesn't line up much with the content
A short 🧵 with some notes on errors made in the article, and the evidence on what we do/don't know about
#nondoms
responding to
#tax
reform
#TaxTwitter
What do we want from next week's "fiscal event"?
1. Details on how energy support will be delivered
2. A government that embraces objective scrutiny
3. Evidence behind the government's growth 'strategy'
🧵1/4
What's really amazing is that surging interest rates have been accompanied by a *plunge* in the pound. This is not supposed to happen in advanced countries: we expect deficit spending to drive up interest rates and make the currency *rise*, which is what happened under Reagan
'left open the possibility of holding two Budgets ahead of this year’s general election.' That'll delighted
@TheIFS
and
@instituteforgov
... UK chancellor signals he wants more tax cuts before election via
@ft
OBR was created in 2010 to prevent politicians “fiddling the figures”
Since then it’s built an outstanding reputation
Sunak’s ‘friends’ have been briefing about his hatred for OBR
He must value it, not brief against it
Long version of yday’s thread
At a Fringe event at Conservative Party Conference, the Business and Energy Secretary confirmed he had read a draft of this report, but was still against the government telling people to use less energy
And still the government won’t advise households or businesses to use less energy? National Grid warns households could face three-hour power cuts this winter
More generally we are in a tough fiscal situation - costs growing faster than revenues
Govt must meaningfully reduce functions of state or increase taxes
Instead it’s stretching/breaking public services and chipping away at projects twice a year
This is NOT long term thinking
Huge congratulations to my colleagues for producing this mega report on how to get government working, and a great event to launch it today with two former PMs agreeing with many recommendations. Read it here
We at
@instituteforgov
will be looking out for how
@RishiSunak
plans to support low income households through unprecented inflation. Fuel duty cut widely anticipated but will mostly benefit those on highest incomes.. what other options are available? 1/8
The most important thing, though, is a change in attitude among political classes. They must end their addiction to magical thinking. They need a proper fiscal strategy and a commitment to good policy-making, which the above can enable and enforce 8/8
Fiscal rules, independent fiscal institutions, central bank communications should NOT be this exciting
But at least we’ve been reminded of their importance
@angelaeagle
Q - £1000 per household for increased public sector wages?
Bowler: I don't know whether it is the case that figure emanates from anyone in the Treasury
So what is a “fiscal event” and how is it different from a (mini)budget?
To be frank, “these semantics are a waste of time”
At most it’s an excuse to not ask for a forecast (which is a mistake)
From
@gemmatetlow
’s recent blog for
@instituteforgov
Enjoyed talking about the puzzling absence of policies to deal with cost of living, chaotic policymaking by a govt that can’t get out of firefighting mode, and how this crisis is going to last well into next year with
@ShelaghFogarty
on
@LBC
'It's rare for me to tear my hair out on the radio like this – but this is an abomination!'
Shelagh Fogarty vents to Olly Bartrum of the Institute for Government over the lack of ideas coming from Tory leadership candidates on tackling the cost of living crisis.
@ShelaghFogarty
doing UK macro for the past 4 years has been interesting but incredibly depressing
can we please have some stability and strong growth so that i can stop being the guy sitting in the corner staring glumly at spreadsheets and mumbling about how terrible everything is. thanks
@tompope0
@Gilesyb
@jburnmurdoch
Think there's a bit of a mental health story here too, alongside the early retirement in older groups (thanks to you for pointing to me to this in first place Tom)
Given Liz Truss’ claims about not being warned by HMT… worth revisiting
@CommonsTreasury
session where second perm sec Beth Russell was very confident that officials warned Truss and Kwarteng about the risks the mini budget posed to financial stability… but they were ignored
Beth Russell confident they highlighted risks around financing requirements for mini budget...
"Ultimately the decisions are for ministers"... but did point out difference btwn market expectations for size of mini budget and what was actually announced
Yes this is exactly how Budget negotiations play out
- everyone being very cheery and cordial
- HMT saying yes to everything and being completely fine with other departments making tax policy
How lovely
still just staring at this chart - if this prediction is correct it will (rightly) dominate politics for the remainder of this parliament
the human consequences of such rapid change in living standards - given existing vulnerabilities - difficult to imagine
can see why Hunt didn't mention real household disposable income (main measure of living standards) in the speech
a devastating picture for living standards for which there is no meaningful comparison in recent history
On risk mgmt and Covid:
1. Even if HMT (and others) were focusing on flu they should've been more prepared for Covid
2. Deficit reduction alone is not a good risk strategy
New
@instituteforgov
blog from me reflecting on Osborne's inquiry appearance
Latest oppo costing is out on Oil and Gas Levy. The key negative impact - on investment - is literally assumed by special advisors, not based on analysis.
Utter nonsense and this process needs reform - handing over to OBR - as argued by
@gemmatetlow
The job of costing opposition policies should be removed from ministerial influence to ensure they provide genuinely useful information via
@instituteforgov
I argue here that Jeremy Hunt should call off the budget
Or, more realistically, appeal to Hunt and his successors to stop imposing relentless fiscal events on officials - the payoff will be better policy and more opportunities for “big bang” reforms
IfG report - Sunak thought he was offering a generous offset of energy bills back in May. Things have got much worse. If new PM wants to be as generous it could cost them £23bn this winter and then another £90 next financial year on current forecasts. 🧵
Latest blog makes some familiar points but they're worth driving home: tax cuts...
- Mean a cut to public services or (probably) breaking fiscal rules - candidates need to say which they prefer
- Will not deliver long term growth
- Make inflation worse
Note to the inquiry counsel: policies (eat out to help out) that stimulate consumption in the context of a pandemic are not 'obviously good for the economy' - if it encourages transmission the lifetime economic benefit is at most unclear, at worst negative
Huge credit to the team at
@CitizensAdvice
for pulling together a cost of living dashboard, will be v useful in coming months
Already the no. of people unable to top up prepayment meters (going without energy) at 2.9x its 2021 level, 6.71x its 2019 level
@Jeremy_Hunt
This is positive, but we will need to perform better than this go catch up with our nearest competitors seeing as be have the lowest investment in the G7 (both gross and business) and among the worst in the OECD
Repeating very obviously false claims about employment (for the 8th and 9th time) today despite being warned by
@FullFact
and the UK stats authority is really quite a bold and astonishing choice by
@BorisJohnson
given the current context
Professor Danny Blanchflower economist & fisherman
Here is UK total employment which is DOWN 588k since jan 2020 and it is down since last summer also
How is that up
@BorisJohnson
I heard you lie about that twice in PMQs today? You need to correct your lies
Jeremy Hunt's Budget:
* 2p cut in NI - cost £10billion
* Extending fuel duty freeze & 5p cut - cost £5bn
* New tax on vapes and increase in tobacco duty - raises £500m
* Scaling back non-dom tax regime - raises £2bn
* Extending windfall tax on profits of oil and gas companies
*…
In a tweet: even if you ONLY CARE ABOUT THE ECONOMY constantly arguing vs restrictions is to misunderstand all of the excellent work that was done on pandemic economics - and that was definitely available to Sunak/HMT at least by Summer 2020, even if they didn't notice in March
Perhaps too late but here comes a thread on what we thought went wrong with Covid decision making - in Sunak's Treasury and elsewhere - because it seems v poorly understood.
A good pandemic policy is not one that pits health vs economy - it is not a simple tradeoff...
Citizens' Advice saw ~28k people who were unable to top up their prepayment meters in 2022.
That's SEVENTEEN times more than in 2017.
My comment last week for
@instituteforgov
on why govt can't blame this on Ofgem
+ more from CA