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Spending review is not the end of austerity, warns IFS - live updates Spending review is not the end of austerity, warns IFS - live updates
(35 minutes later)
2.55pm GMT14:55
Q: Will there be a two-tier benefit system as people are moved onto Universal Credit?
Andrew Hood agrees that any system that introduces cuts for new claimants but protects existing ones creates a two-tier system.
There is transitional protection, but expressed in cash terms, which means that people should not receive less under the new system (inflation, though, could erode that protection).
Transitional protection can last a very long time, Paul Johnson adds.
Q: And how can transitional protection be lost?
Several ways:
2.41pm GMT14:41
The IFS are helpfully uploading all their presentations, so you can see their work on the Autumn Statement and Spending Review.
Updated at 2.43pm GMT
2.40pm GMT14:40
Sky’s Ed Conway sums it up:
IFS broad message: yday makes life less painful for welfare recipients in short run but slightly worse in long run pic.twitter.com/L7Rs9JT6ls
2.38pm GMT14:38
Q: Is George Osborne right to spend the ‘windfall’ from the OBR’s improved fiscal forecasts?
Gemma Tetlow agrees that the chancellor’s response is a little ‘asymmetric’ (as the chancellor could have banked the money and gunned for a more rapid fiscal consolidation).
Paul Johnson gives the chancellor some (guarded) support -- saying the alternative would have been to press on and slash police spending, foreign spending, or hike taxes.
It doesn’t seem to me to be not wise to not implement massive spending cuts if you think you might not have to.
Updated at 2.54pm GMT
2.34pm GMT14:34
Q: Is Iain Duncan Smith right when he says today that under the new Universal Credit system, people are moving into work faster and earning more than under the current?
Paul Johnson declines to comment on the behaviour of the very small number of people already on UC; the IFS’s work relates to the distributional impact when it is fully implemented.
Updated at 2.54pm GMT
2.31pm GMT14:31
Onto questions.
He says that the government overestimated the savings from the tax credit cuts, which is why the u-turn only yields £3.4bn not the £4.4bn expected.
Q: What is the distributional impact of Universal credit system?
The impact is complicated, and doesn’t really match people’s place on the income scale.
Single earner couples tend to do well, while two income families and single parents do less well, Hood adds.
2.27pm GMT14:27
The IFS has also crunched some numbers, showing how the universal credit system will change the benefit system:
Universal credit vs. the system it is replacing
2.24pm GMT14:242.24pm GMT14:24
IFS: Government still planning big cuts to in-work benefitsIFS: Government still planning big cuts to in-work benefits
The IFS’s Andrew Hood is now hammering home the point that the benefit system will still be much less generous in the long term.The IFS’s Andrew Hood is now hammering home the point that the benefit system will still be much less generous in the long term.
He says:He says:
In the long run, the system will be much less generous to low income households. That’s the big headline...because other cuts are going aheadIn the long run, the system will be much less generous to low income households. That’s the big headline...because other cuts are going ahead
This chart confirms that point - showing that the poorest families are actually losing slightly more in the long term than they were before.This chart confirms that point - showing that the poorest families are actually losing slightly more in the long term than they were before.
IFS notes little change since yesterday's autumn statement in working age benefits picture pic.twitter.com/C0MtWBuFUJIFS notes little change since yesterday's autumn statement in working age benefits picture pic.twitter.com/C0MtWBuFUJ
The tax-credit u-turn has “no long-term effect”, he insists. The government is still planning “deep cuts to working-age benefits”, including to low-income working families.The tax-credit u-turn has “no long-term effect”, he insists. The government is still planning “deep cuts to working-age benefits”, including to low-income working families.
On average, the overall package will strengthen work incentives, Hood says.On average, the overall package will strengthen work incentives, Hood says.
But there are still measures that will hurt low-paid workers, such as cuts to the work allowance:But there are still measures that will hurt low-paid workers, such as cuts to the work allowance:
This, Hood says, is a very similar impact to the tax credit changes which have now been reversed.This, Hood says, is a very similar impact to the tax credit changes which have now been reversed.
2.11pm GMT14:112.11pm GMT14:11
Abandoning the planned cuts to tax credits will cost £3.4bn in the 2016-17 financial year, Andrew Hood explains - not the £4.4bn expected.Abandoning the planned cuts to tax credits will cost £3.4bn in the 2016-17 financial year, Andrew Hood explains - not the £4.4bn expected.
2.07pm GMT14:072.07pm GMT14:07
Andrew Hood of the IFS is now running through the latest welfare changes.Andrew Hood of the IFS is now running through the latest welfare changes.
The big picture is that:The big picture is that:
2.05pm GMT14:052.05pm GMT14:05
Giving councils full retention of business rates is ‘genuinely revolutionary’, David Phillips adds, and part of the government’s devolution of powers:Giving councils full retention of business rates is ‘genuinely revolutionary’, David Phillips adds, and part of the government’s devolution of powers:
2.04pm GMT14:042.04pm GMT14:04
1.58pm GMT13:581.58pm GMT13:58
The IFS is also concerned about Osborne’s plan to allow local councils to raise an extra 2% from residents, to fund social care in their area.The IFS is also concerned about Osborne’s plan to allow local councils to raise an extra 2% from residents, to fund social care in their area.
The problem is that councils who already charge the highest bills can obviously raise more cash than an area with lower charges.The problem is that councils who already charge the highest bills can obviously raise more cash than an area with lower charges.
Councils in “leafy areas with high council tax and relatively low social care needs”, such as Rutland, benefit most from this change, says the David Phillips, senior research economist at the IFS.Councils in “leafy areas with high council tax and relatively low social care needs”, such as Rutland, benefit most from this change, says the David Phillips, senior research economist at the IFS.
It is also “very tricky” to see how central government can make sure that extra funds are devoted to social care.It is also “very tricky” to see how central government can make sure that extra funds are devoted to social care.
Updated at 2.01pm GMTUpdated at 2.01pm GMT
1.52pm GMT13:521.52pm GMT13:52
The iFS is now outlining the huge funding cuts which local government’s now face.The iFS is now outlining the huge funding cuts which local government’s now face.
Local government Departmental Expenditure Limit to be cut by 56% by 2019-20: https://t.co/wh4RWt64uYLocal government Departmental Expenditure Limit to be cut by 56% by 2019-20: https://t.co/wh4RWt64uY
Level of cuts to local government is incredible (and politically cynical: voters will blame councils) https://t.co/wYGpQSiXHfLevel of cuts to local government is incredible (and politically cynical: voters will blame councils) https://t.co/wYGpQSiXHf
If they keep cutting grants in line with the existing formula, then councils who have already taken the biggest hit will suffer the most.If they keep cutting grants in line with the existing formula, then councils who have already taken the biggest hit will suffer the most.
1.48pm GMT13:481.48pm GMT13:48
Reminder, you can watch the IFS briefing online here.Reminder, you can watch the IFS briefing online here.
1.47pm GMT13:471.47pm GMT13:47
Here’s Katie Allen’s news story on the Institute for Fiscal Studies new report:Here’s Katie Allen’s news story on the Institute for Fiscal Studies new report:
Related: Autumn statement: IFS warns on tax rises and spending cutsRelated: Autumn statement: IFS warns on tax rises and spending cuts
1.46pm GMT13:461.46pm GMT13:46
It won’t have escaped anyone’s notice that George Osborne blew through his welfare cap yesterday, Gemma Tetlow deadpans.It won’t have escaped anyone’s notice that George Osborne blew through his welfare cap yesterday, Gemma Tetlow deadpans.
She reminds us that the OBR expects the government to breach the cap three years running.She reminds us that the OBR expects the government to breach the cap three years running.
Reclassifications in funding sources means the government will just hit its cap in the following two years, Tetlow adds, suggesting that such ‘reclassifications’ need to be scrutinised closely to ensure the government doesn’t fudge this issue.Reclassifications in funding sources means the government will just hit its cap in the following two years, Tetlow adds, suggesting that such ‘reclassifications’ need to be scrutinised closely to ensure the government doesn’t fudge this issue.
one piece of bad news for Osborne yesterday was that fcast for spending on disability benefit went up, IFS saysone piece of bad news for Osborne yesterday was that fcast for spending on disability benefit went up, IFS says
1.43pm GMT13:431.43pm GMT13:43
George Osborne has slightly eased the pace of fiscal consolidation, Tetlow explains.George Osborne has slightly eased the pace of fiscal consolidation, Tetlow explains.
As this chart shows, the UK is on track to reach the same point, but more slowly.As this chart shows, the UK is on track to reach the same point, but more slowly.
There’s a slight change to the ‘mix’ - tax rises now makes up 17%, up from 16%. But it’s still mainly dependent on welfare cuts.There’s a slight change to the ‘mix’ - tax rises now makes up 17%, up from 16%. But it’s still mainly dependent on welfare cuts.
1.40pm GMT13:401.40pm GMT13:40
IFS - areas seeing largest cuts, incl:Transport, local govt dept expenditure limit.At other end of scale cabinet office sees real increasesIFS - areas seeing largest cuts, incl:Transport, local govt dept expenditure limit.At other end of scale cabinet office sees real increases
1.39pm GMT13:391.39pm GMT13:39
The only non-protected department to avoid the squeeze this time is defence, Gemma Tetlow adds - last time it took a big cut, this time its seen its budget rise (to address new security concerns)The only non-protected department to avoid the squeeze this time is defence, Gemma Tetlow adds - last time it took a big cut, this time its seen its budget rise (to address new security concerns)
1.38pm GMT13:381.38pm GMT13:38
Despite the lower spending cuts, it won’t be an easy ride of the next few years, Tetlow continues.Despite the lower spending cuts, it won’t be an easy ride of the next few years, Tetlow continues.
And this chart shows where the axe has fallen hardest - including Transport, and the Department for Business, Innovation and Skills.And this chart shows where the axe has fallen hardest - including Transport, and the Department for Business, Innovation and Skills.
Unprotected Departmental Expenditure Limits falling 18% by 2019-20. Gemma Tetlow: https://t.co/uA0GuvbfHE pic.twitter.com/UnkMtkXbZHUnprotected Departmental Expenditure Limits falling 18% by 2019-20. Gemma Tetlow: https://t.co/uA0GuvbfHE pic.twitter.com/UnkMtkXbZH
1.37pm GMT13:371.37pm GMT13:37
Osborne’s new stamp duty levy on new second homes and buy-to-let properties will he hard to implement, Gemma Tetlow suggests.Osborne’s new stamp duty levy on new second homes and buy-to-let properties will he hard to implement, Gemma Tetlow suggests.
Someone could, for example, buy a house, live in it for a bit [thus avoiding the levy], and then rent it out.Someone could, for example, buy a house, live in it for a bit [thus avoiding the levy], and then rent it out.
1.34pm GMT13:341.34pm GMT13:34
IFS says apprenticeship levy is "simply a tax on employment and earnings in large firms" could encourage training, might notIFS says apprenticeship levy is "simply a tax on employment and earnings in large firms" could encourage training, might not
1.33pm GMT13:331.33pm GMT13:33
IFS: Apprenticeship levy may encourage 'relabelling'IFS: Apprenticeship levy may encourage 'relabelling'
The Apprenticeship levy (which has annoyed businesses) is better than the plan originally proposed by the government, Tetlow says:The Apprenticeship levy (which has annoyed businesses) is better than the plan originally proposed by the government, Tetlow says:
It will only affect the largest 2% of companies - and is a tax on the earnings of large firms (they get vouchers, which can then be redeemed if they actually train some workers).It will only affect the largest 2% of companies - and is a tax on the earnings of large firms (they get vouchers, which can then be redeemed if they actually train some workers).
Related: Fury over Osborne's £11.6bn business 'payroll tax'Related: Fury over Osborne's £11.6bn business 'payroll tax'
The OBR have trimmed their growth forecast, to recognise the impact on large firms, says Tetlow.The OBR have trimmed their growth forecast, to recognise the impact on large firms, says Tetlow.
She also suggests that firms could be tempted into ‘relabelling’ existing projects to qualify, rather than taking on more apprentiships.She also suggests that firms could be tempted into ‘relabelling’ existing projects to qualify, rather than taking on more apprentiships.
May relabelingMay relabeling
1.29pm GMT13:291.29pm GMT13:29
Gemma Tetlow of the IFS is explaining how Osborne benefitted from various positive forecasting changes.Gemma Tetlow of the IFS is explaining how Osborne benefitted from various positive forecasting changes.
The overall effect was to strengthen the public finances by around £4bn in the medium term.The overall effect was to strengthen the public finances by around £4bn in the medium term.
This slide shows the details:This slide shows the details:
1.26pm GMT13:261.26pm GMT13:26
Osborne's inflexible fiscal target (surplus in 2019-20) may mean revisiting spending/raising taxes/abandoning target https://t.co/O88mQYsjGfOsborne's inflexible fiscal target (surplus in 2019-20) may mean revisiting spending/raising taxes/abandoning target https://t.co/O88mQYsjGf
1.26pm GMT13:261.26pm GMT13:26
There are ‘big distributional effects’ from the cuts in funding from central government to local government, Johnson says.There are ‘big distributional effects’ from the cuts in funding from central government to local government, Johnson says.
Changes to the business rate system, allowing local authorities to retain growth in revenue, is a “genuinely big change”.Changes to the business rate system, allowing local authorities to retain growth in revenue, is a “genuinely big change”.
It means councils will be more dependent than ever on the economic performance in their area.It means councils will be more dependent than ever on the economic performance in their area.
Updated at 1.54pm GMTUpdated at 1.54pm GMT
1.23pm GMT13:231.23pm GMT13:23
IFS: Long-term welfare generosity still being cutIFS: Long-term welfare generosity still being cut
Paul Johnson is adamant that the chancellor isn’t suddenly being more generous to the poor:Paul Johnson is adamant that the chancellor isn’t suddenly being more generous to the poor:
“The long term generosity of the welfare system will be cut just as much as was ever intended”“The long term generosity of the welfare system will be cut just as much as was ever intended”
1.22pm GMT13:221.22pm GMT13:22
On the tax credits u-turn, Paul Johnson says there is no net change in the long run - because Universal Credit is already legislated to replace current benefits.On the tax credits u-turn, Paul Johnson says there is no net change in the long run - because Universal Credit is already legislated to replace current benefits.
He confirms that 2.6m families will be worse off under UC, losing around £1,600 each.He confirms that 2.6m families will be worse off under UC, losing around £1,600 each.
But another 1.9m households will be better off.But another 1.9m households will be better off.
IFS: estimate in steady state univ credit will now involve 2.6m working families being an average of £1,600 a year worse off 1/2IFS: estimate in steady state univ credit will now involve 2.6m working families being an average of £1,600 a year worse off 1/2
IFS cont: than they would have been under the current system while 1.9 million will be £1,400 a year better off 2/2IFS cont: than they would have been under the current system while 1.9 million will be £1,400 a year better off 2/2
1.19pm GMT13:191.19pm GMT13:19
Johnson warns that housing associations are facing particularly deep cuts to their grants, around 40% in 2017.Johnson warns that housing associations are facing particularly deep cuts to their grants, around 40% in 2017.
1.17pm GMT13:171.17pm GMT13:17
Johnson opening remarks: This is not the end of “austerity” but the cuts will be less severe than implied in July: https://t.co/O88mQYsjGfJohnson opening remarks: This is not the end of “austerity” but the cuts will be less severe than implied in July: https://t.co/O88mQYsjGf
1.17pm GMT13:171.17pm GMT13:17
George Osborne has set himself an inflexible target, to achieve a surplus this parliament, Paul Johnson continues.George Osborne has set himself an inflexible target, to achieve a surplus this parliament, Paul Johnson continues.
And there’s only a 50:50 chance that he’ll achieve it.And there’s only a 50:50 chance that he’ll achieve it.
If he fails - perhaps because the Office for Budget forecasts are too optimistic - then the chancellor faces three choices; revise spending, raise taxes, or abandon the surplus target.If he fails - perhaps because the Office for Budget forecasts are too optimistic - then the chancellor faces three choices; revise spending, raise taxes, or abandon the surplus target.
1.12pm GMT13:121.12pm GMT13:12
IFS: Austerity is not overIFS: Austerity is not over
Paul Johnson, head of the IFS is introducing its analysis now (here’s the livefeed)Paul Johnson, head of the IFS is introducing its analysis now (here’s the livefeed)
He says that the government is now aiming to cut spending at non-protected departments by around 18%, compared to around 27% previously.He says that the government is now aiming to cut spending at non-protected departments by around 18%, compared to around 27% previously.
Johnson says:Johnson says:
Contrary to some headlines this morning, this is absolutely not the end of austerity....Contrary to some headlines this morning, this is absolutely not the end of austerity....
This spending review is still one of the tightest on record. Maybe not as bad as 2010, but that’s a pretty high bar.This spending review is still one of the tightest on record. Maybe not as bad as 2010, but that’s a pretty high bar.
Par example:Par example:
Thursday's Telegraph front page: The end of austerity #tomorrowspaperstoday #bbcpapers #spendingreview pic.twitter.com/NABVUsf0FiThursday's Telegraph front page: The end of austerity #tomorrowspaperstoday #bbcpapers #spendingreview pic.twitter.com/NABVUsf0Fi
But it’s also true that the cuts are less severe than outlined in the last budget, Johnson adds.But it’s also true that the cuts are less severe than outlined in the last budget, Johnson adds.
Updated at 1.17pm GMTUpdated at 1.17pm GMT
1.07pm GMT13:071.07pm GMT13:07
The IFS is also warning that - despite scrapping tax credits cuts - George Osborne’s plan still means reducing non-pension benefits to their lowest level as a share of national income for 30 years.The IFS is also warning that - despite scrapping tax credits cuts - George Osborne’s plan still means reducing non-pension benefits to their lowest level as a share of national income for 30 years.
1.05pm GMT13:051.05pm GMT13:05
IFS: 2.6m families worse offIFS: 2.6m families worse off
Here’s the first newsline from the IFS, via the Press Association:Here’s the first newsline from the IFS, via the Press Association:
Around 2.6 million working families will be an average 1,600 a year worse off as a result of benefit changes confirmed in Chancellor George Osborne’s Spending Review, the Institute for Fiscal Studies has found.Around 2.6 million working families will be an average 1,600 a year worse off as a result of benefit changes confirmed in Chancellor George Osborne’s Spending Review, the Institute for Fiscal Studies has found.
1.03pm GMT13:031.03pm GMT13:03
IFS Spending Review briefing will begin in a few minutes - livestream: https://t.co/gu9AQVXkKY pic.twitter.com/J9AMOrsHBfIFS Spending Review briefing will begin in a few minutes - livestream: https://t.co/gu9AQVXkKY pic.twitter.com/J9AMOrsHBf
1.02pm GMT13:021.02pm GMT13:02
IFS Spending Review briefing beginsIFS Spending Review briefing begins
The Institute for Fiscal Studies is releasing its analysis of the Spending Review now, at Senate House in London.The Institute for Fiscal Studies is releasing its analysis of the Spending Review now, at Senate House in London.
12.54pm GMT12:5412.54pm GMT12:54
Apparently they let the chancellor loose on an actual new house....Apparently they let the chancellor loose on an actual new house....
Chancellor welcomes news @PersimmonHomes to build 80,000 homes & create 1,000 jobs by 2020 https://t.co/TjoLOG0v9V pic.twitter.com/Kila4eioFsChancellor welcomes news @PersimmonHomes to build 80,000 homes & create 1,000 jobs by 2020 https://t.co/TjoLOG0v9V pic.twitter.com/Kila4eioFs
Updated at 12.55pm GMTUpdated at 12.55pm GMT
12.18pm GMT12:1812.18pm GMT12:18
The Institute for Fiscal Studies gives its verdict on the Autumn Statement in around 40 minutes time - it will be live-streamed here.The Institute for Fiscal Studies gives its verdict on the Autumn Statement in around 40 minutes time - it will be live-streamed here.
LIVE FEED of our post- #SR2015 & Autumn Statement analysis from 1pm today: https://t.co/gu9AQVXkKYLIVE FEED of our post- #SR2015 & Autumn Statement analysis from 1pm today: https://t.co/gu9AQVXkKY
12.09pm GMT12:0912.09pm GMT12:09
Some of today’s newspapers claim that Osborne unveiled ‘the end of austerity’. The Daily Mail sounds positively cross about it (like most things.....):Some of today’s newspapers claim that Osborne unveiled ‘the end of austerity’. The Daily Mail sounds positively cross about it (like most things.....):
Thursday's Daily Mail front page: Whatever happened to austerity? #tomorrowspaperstoday #bbcpapers #spendingreview pic.twitter.com/Z0NTSDEjJuThursday's Daily Mail front page: Whatever happened to austerity? #tomorrowspaperstoday #bbcpapers #spendingreview pic.twitter.com/Z0NTSDEjJu
It’s true that Osborne has loosened the pace of cuts. But there are still chunky cuts to public spending, an increase in tax receipts, and a commitment to a surplus by 2020. Plus significant welfare cuts.It’s true that Osborne has loosened the pace of cuts. But there are still chunky cuts to public spending, an increase in tax receipts, and a commitment to a surplus by 2020. Plus significant welfare cuts.
And that’s why Paul Johnson, head of the IFS, believes the age of austerity isn’t over.And that’s why Paul Johnson, head of the IFS, believes the age of austerity isn’t over.
Spending Review not the end of the austerity - Paul Johnson @TheIFSSpending Review not the end of the austerity - Paul Johnson @TheIFS
Updated at 12.13pm GMTUpdated at 12.13pm GMT
11.52am GMT11:5211.52am GMT11:52
German bank Berenberg is predicting that George Osborne will not achieve the cuts outlined yesterday.German bank Berenberg is predicting that George Osborne will not achieve the cuts outlined yesterday.
Their economist, Kallum Pickering, says:Their economist, Kallum Pickering, says:
George Osborne has set a precedent in the last five years that he won’t break over the next five years. He makes promises for cuts that he never quite gets around to. This is good news for the economy today, but a risk for tomorrow.George Osborne has set a precedent in the last five years that he won’t break over the next five years. He makes promises for cuts that he never quite gets around to. This is good news for the economy today, but a risk for tomorrow.
This chart shows how the UK has consistently borrowed more than predicted:This chart shows how the UK has consistently borrowed more than predicted:
Pickering also reckons it will be “impossible” to cut day-to-day spending as deeply as targeted.Pickering also reckons it will be “impossible” to cut day-to-day spending as deeply as targeted.
In our view, the plan to bring the deficit down by reductions in day to day spending is not feasible. This year, total government spending will be a little over 40% of GDP. The Government is targeting to reduce this total to around 35% of GDP by 2020. This will be the lowest level since 2000 and even below the Thatcher years...In our view, the plan to bring the deficit down by reductions in day to day spending is not feasible. This year, total government spending will be a little over 40% of GDP. The Government is targeting to reduce this total to around 35% of GDP by 2020. This will be the lowest level since 2000 and even below the Thatcher years...
11.23am GMT11:2311.23am GMT11:23
We may need George Osborne’s brick-laying skills -- his plan to build 400,000 new homes could founder if enough trained builders can’t be found.We may need George Osborne’s brick-laying skills -- his plan to build 400,000 new homes could founder if enough trained builders can’t be found.
It may also bring little short-term help to renters. Frank Nash, partner at chartered accountants Blick Rothenberg, explains:It may also bring little short-term help to renters. Frank Nash, partner at chartered accountants Blick Rothenberg, explains:
“The chancellor has openly admitted that more affordable housing, including the private sector, needs to come forward to allow people to become owner occupiers and achieve their aspirations. However, it will take at least five years and, until those homes are built, young families have no choice but to rent.“The chancellor has openly admitted that more affordable housing, including the private sector, needs to come forward to allow people to become owner occupiers and achieve their aspirations. However, it will take at least five years and, until those homes are built, young families have no choice but to rent.
“The problem is that until these new homes are built, private rented property is price inelastic. Landlords need to protect their investment and are expected to pass the cost on in the form of higher rent. This reduces a tenant’s ability to save a deposit for a home of their own, and in turn their ability to make best use of the range of the Help-to-Buy initiatives.”“The problem is that until these new homes are built, private rented property is price inelastic. Landlords need to protect their investment and are expected to pass the cost on in the form of higher rent. This reduces a tenant’s ability to save a deposit for a home of their own, and in turn their ability to make best use of the range of the Help-to-Buy initiatives.”
Nash also fears that the new 3% stamp duty levy on second-home and Buy-to-Let landlords could rebound, and be passed onto renters.Nash also fears that the new 3% stamp duty levy on second-home and Buy-to-Let landlords could rebound, and be passed onto renters.
Buy-to-let surcharge will "hurt tenants, not landlords" https://t.co/fsxKm9MiOw via @CityAMBuy-to-let surcharge will "hurt tenants, not landlords" https://t.co/fsxKm9MiOw via @CityAM
Updated at 11.25am GMTUpdated at 11.25am GMT
11.04am GMT11:0411.04am GMT11:04
There’s something slightly clichéd and unconvincing about politicians tromping around building sites....There’s something slightly clichéd and unconvincing about politicians tromping around building sites....
..but at least George Osborne has been learning some new skills...but at least George Osborne has been learning some new skills.
10.58am GMT10:5810.58am GMT10:58
George Osborne has already warned that he won’t shy away from “difficult decisions”.George Osborne has already warned that he won’t shy away from “difficult decisions”.
The chancellor has spent this morning defending criticism of his autumn statement -- and claims that he’s abandoned austerity by committing to spend his £27bn fiscal windfall.The chancellor has spent this morning defending criticism of his autumn statement -- and claims that he’s abandoned austerity by committing to spend his £27bn fiscal windfall.
He also declined to apologise or to admit a blunged over the tax credits u-turn, as we report here:He also declined to apologise or to admit a blunged over the tax credits u-turn, as we report here:
Related: Osborne: I will continue to take 'difficult decisions' after tax credits U-turnRelated: Osborne: I will continue to take 'difficult decisions' after tax credits U-turn
Asked by the Today presenter Nick Robinson whether he was admitting he had made a mistake and was apologising or whether he had simply been forced to change tack by critics, the chancellor said that his “central judgment” to move to a lower welfare and higher wage economy was the right one.Asked by the Today presenter Nick Robinson whether he was admitting he had made a mistake and was apologising or whether he had simply been forced to change tack by critics, the chancellor said that his “central judgment” to move to a lower welfare and higher wage economy was the right one.
10.48am GMT10:4810.48am GMT10:48
Resolution: Poor risk being trapped in low-paid, part-time jobsResolution: Poor risk being trapped in low-paid, part-time jobs
Torsten Bell, the Resolution Foundation’s director, is adamant that George Osborne’s spending review decisions hit the poor but spare the rich.Torsten Bell, the Resolution Foundation’s director, is adamant that George Osborne’s spending review decisions hit the poor but spare the rich.
That’s because long-term welfare changes are still in force -- so as Universal Credit is rolled out, millions more people will be hit.That’s because long-term welfare changes are still in force -- so as Universal Credit is rolled out, millions more people will be hit.
Bell says:Bell says:
The most damaging changes are to universal credit, the government’s flagship welfare programme which is at serious risk of being undermined. For working households with children on universal credit the average loss with be £1,300 in 2020.The most damaging changes are to universal credit, the government’s flagship welfare programme which is at serious risk of being undermined. For working households with children on universal credit the average loss with be £1,300 in 2020.
These changes will also increase the risk of people being trapped in low-paid short-hours work.These changes will also increase the risk of people being trapped in low-paid short-hours work.
Universal credit replaces a set of other benefits, and is already being piloted - as Ashwin Kumar, director of Liverpool Economics, explains:Universal credit replaces a set of other benefits, and is already being piloted - as Ashwin Kumar, director of Liverpool Economics, explains:
Those hit hardest by the new universal credit rules will be lone parents, disabled people and couples with children who rent their home rather than have a mortgage.Those hit hardest by the new universal credit rules will be lone parents, disabled people and couples with children who rent their home rather than have a mortgage.
Currently, the rules allow lone parents £8,800 a year in earnings before their universal credit starts to get reduced. From April that figure will drop to £4,800.Currently, the rules allow lone parents £8,800 a year in earnings before their universal credit starts to get reduced. From April that figure will drop to £4,800.
Related: So, Osborne scrapped tax credit cuts – but what of universal credit?Related: So, Osborne scrapped tax credit cuts – but what of universal credit?
10.28am GMT10:2810.28am GMT10:28
Resolution Foundation: Osborne still hitting poor familiesResolution Foundation: Osborne still hitting poor families
The Resolution Foundation are continuing to kick the tires of the autumn statements.The Resolution Foundation are continuing to kick the tires of the autumn statements.
The think tank is warning that George Osborne has slipped out significant tax rises, on top of the surprise £27bn pick-up in the public finances from the independent Office for Budget Responsibility.The think tank is warning that George Osborne has slipped out significant tax rises, on top of the surprise £27bn pick-up in the public finances from the independent Office for Budget Responsibility.
It is also reiterating its concerns that poor families will still be hit, as the universal credit is implemented in five years (meaning the tax-credit u-turn is only temporary)It is also reiterating its concerns that poor families will still be hit, as the universal credit is implemented in five years (meaning the tax-credit u-turn is only temporary)
Matthew Whittaker @resfoundation: Osborne's tax rises amount to £27bn, on top of the £27bn windfall from @OBR_UK forecasts.Matthew Whittaker @resfoundation: Osborne's tax rises amount to £27bn, on top of the £27bn windfall from @OBR_UK forecasts.
Matthew Whittaker @resfoundation: no change in loss for working families by 2020 as UC kicks in: £650 average for poorest 50% of households.Matthew Whittaker @resfoundation: no change in loss for working families by 2020 as UC kicks in: £650 average for poorest 50% of households.
The chart we ran earlier in the blog shows how the poorest are worst hit by tax and benefit changes this parliament.The chart we ran earlier in the blog shows how the poorest are worst hit by tax and benefit changes this parliament.
According to the Resolution Foundation, the move to universal credit will cost working households £1,000 on average in 2020.According to the Resolution Foundation, the move to universal credit will cost working households £1,000 on average in 2020.
Executive chair David Willetts (a former Tory minister), is also struck by how Osborne’s austerity drive has softened, compared to the pre-election budget in March:Executive chair David Willetts (a former Tory minister), is also struck by how Osborne’s austerity drive has softened, compared to the pre-election budget in March:
Willetts @resfoundation: In old days, politicians promised milk + honey before election and you'd get bad news after; Osborne did opposite.Willetts @resfoundation: In old days, politicians promised milk + honey before election and you'd get bad news after; Osborne did opposite.
Former Liberal Democrat MP David Laws is also unimpressed:Former Liberal Democrat MP David Laws is also unimpressed:
David Laws @resfoundation: Osborne has fudged how much he's U-turned by focusing on 2019-20 instead of near-term.David Laws @resfoundation: Osborne has fudged how much he's U-turned by focusing on 2019-20 instead of near-term.
'He's spending a lot of time + money + capital shooting other people's foxes, rather than developing a strategy': David Laws @resfoundation'He's spending a lot of time + money + capital shooting other people's foxes, rather than developing a strategy': David Laws @resfoundation
Updated at 10.29am GMTUpdated at 10.29am GMT
9.55am GMT09:559.55am GMT09:55
Barclays £72m fine - the "Elephant deal" ...Barclays £72m fine - the "Elephant deal" ...
Katie Martin of the Financial Times has a good take on this morning’s Barclays fine.Katie Martin of the Financial Times has a good take on this morning’s Barclays fine.
Here’s a flavour:Here’s a flavour:
Barclays and the troublesome ‘elephant deal’Barclays and the troublesome ‘elephant deal’
The £72m fine just meted out to Barclays over poor checks on certain very wealthy clients refers to a £1.88bn transaction that the bank described as an “elephant deal” for which one senior manager wanted to “race through” the due diligence process. Here’s what we know from the Financial Conduct Authority’s report.The £72m fine just meted out to Barclays over poor checks on certain very wealthy clients refers to a £1.88bn transaction that the bank described as an “elephant deal” for which one senior manager wanted to “race through” the due diligence process. Here’s what we know from the Financial Conduct Authority’s report.
The 37-page report published by the UK watchdog says:The 37-page report published by the UK watchdog says:
Deals over £20 million were commonly referred to within Barclays as “elephant deals” because of their size and the Transaction, which was for an amount of £1.88 billion, was also referred to as an “elephant deal”.Deals over £20 million were commonly referred to within Barclays as “elephant deals” because of their size and the Transaction, which was for an amount of £1.88 billion, was also referred to as an “elephant deal”.
The FCA is not suggesting that the deal “involved financial crime”, writes Katie Martin. But it says the bank cut corners on checks to avoid irritating important but risky clients. It also went to considerable lengths to keep the transactions confidential, the FCA says..The FCA is not suggesting that the deal “involved financial crime”, writes Katie Martin. But it says the bank cut corners on checks to avoid irritating important but risky clients. It also went to considerable lengths to keep the transactions confidential, the FCA says..
Barclays and the troublesome 'elephant deal' https://t.co/fUwBNT2rpyBarclays and the troublesome 'elephant deal' https://t.co/fUwBNT2rpy
Updated at 10.47am GMTUpdated at 10.47am GMT
9.45am GMT09:459.45am GMT09:45
French bank BNP Paribas also expects the ECB to cut its deposit rate (paid by banks on their ECB deposits) deeper into negative territory.French bank BNP Paribas also expects the ECB to cut its deposit rate (paid by banks on their ECB deposits) deeper into negative territory.
Currently, it is minus 0.2% - and BNPP thinks it will be slashed to -0.4% next Thursday.Currently, it is minus 0.2% - and BNPP thinks it will be slashed to -0.4% next Thursday.
BNP Paribas now expects a 20bps cut to ECB deposit rate in Dec Vs prev forecast of 10bps pic.twitter.com/NdzhpcpplVBNP Paribas now expects a 20bps cut to ECB deposit rate in Dec Vs prev forecast of 10bps pic.twitter.com/NdzhpcpplV
Other banks expect a 10 basis point cut, to -0.3%.Other banks expect a 10 basis point cut, to -0.3%.
9.35am GMT09:359.35am GMT09:35
Barclays’ shares are actually up this morning, gaining 3p to 224p, despite the bank being shamed for cutting corners on financial crime checks.Barclays’ shares are actually up this morning, gaining 3p to 224p, despite the bank being shamed for cutting corners on financial crime checks.
Barclays shareholders clearly spooked by these fines. Shares up only 1.3%. $BARCBarclays shareholders clearly spooked by these fines. Shares up only 1.3%. $BARC
Barclays didn't want to "irritate" big-spending clients by asking too much about where their billions were coming from, FCA says. CrackingBarclays didn't want to "irritate" big-spending clients by asking too much about where their billions were coming from, FCA says. Cracking
Barclays' management have agreed to settle the fine from their bonuses, right?... https://t.co/v6XIm8Z0DUBarclays' management have agreed to settle the fine from their bonuses, right?... https://t.co/v6XIm8Z0DU
Updated at 10.10am GMTUpdated at 10.10am GMT
9.22am GMT09:229.22am GMT09:22
Barclays fined £72m over financial crime risk failingsBarclays fined £72m over financial crime risk failings
Is there no end to the misdeeds of Britain’s banks?Is there no end to the misdeeds of Britain’s banks?
Apparently not. Barclays has just been fined £72m by the City watchdog, the FCA. It’s offence? Failing to minimise the risk that it may be used to facilitate financial crime.Apparently not. Barclays has just been fined £72m by the City watchdog, the FCA. It’s offence? Failing to minimise the risk that it may be used to facilitate financial crime.
The FCA says Barclays failed to take proper checks when transferring £1.88bn of funds from “ultra-high-net-worth clients”.The FCA says Barclays failed to take proper checks when transferring £1.88bn of funds from “ultra-high-net-worth clients”.
Banks are supposed to be extra careful when shifting such funds around, in case the money comes from illegal activities and is being laundered through the system.Banks are supposed to be extra careful when shifting such funds around, in case the money comes from illegal activities and is being laundered through the system.
Barclays, though, appears to have bent over backwards to avoid putting out its richest customers.Barclays, though, appears to have bent over backwards to avoid putting out its richest customers.
The FCA says:The FCA says:
Barclays went to unacceptable lengths to accommodate the clients.Barclays went to unacceptable lengths to accommodate the clients.
Hopefully new CEO Jes Stanley can avoid a repeat....Hopefully new CEO Jes Stanley can avoid a repeat....
FCA fines #Barclays £72m for failing to make proper checks on mega-rich clients because 'it did not wish to inconvenience' themFCA fines #Barclays £72m for failing to make proper checks on mega-rich clients because 'it did not wish to inconvenience' them
Updated at 9.24am GMTUpdated at 9.24am GMT
9.13am GMT09:139.13am GMT09:13
Kit Juckes, top currency strategist at Societe Generale, says we should expect something pretty serious from the ECB at next Thursday’s meeting.Kit Juckes, top currency strategist at Societe Generale, says we should expect something pretty serious from the ECB at next Thursday’s meeting.
Dipping into classical texts, Kit writes:Dipping into classical texts, Kit writes:
“He who exercises no forethought but makes light of his opponents is sure to be captured by them”.“He who exercises no forethought but makes light of his opponents is sure to be captured by them”.
The quote’s from Sun Tzu’s The Art of War and while I don’t think for a second that Mario Draghi is anyone’s opponent, he is regularly under-estimated.The quote’s from Sun Tzu’s The Art of War and while I don’t think for a second that Mario Draghi is anyone’s opponent, he is regularly under-estimated.
It’s a step up from quoting Chairman Mao, anyway....It’s a step up from quoting Chairman Mao, anyway....
So what devilish plan might general Draghi unleash? One option is a “split-level” negative rate, meaning more punishing negative rates for banks who leave lots of money at the ECB.So what devilish plan might general Draghi unleash? One option is a “split-level” negative rate, meaning more punishing negative rates for banks who leave lots of money at the ECB.
Kit says:Kit says:
It’s not really obvious that such a policy would drive rates (and in particular, longer-dated rates) any lower, but it reinforces the sense that Mr Draghi is committed to further easing next month.It’s not really obvious that such a policy would drive rates (and in particular, longer-dated rates) any lower, but it reinforces the sense that Mr Draghi is committed to further easing next month.
9.05am GMT09:059.05am GMT09:05
Mario Draghi hinted strongly in October that he could take more action if needed, to get the eurozone away from deflation.Mario Draghi hinted strongly in October that he could take more action if needed, to get the eurozone away from deflation.
So, he risks a backlash if the ECB isn’t decisive next week.So, he risks a backlash if the ECB isn’t decisive next week.
As Ken Wattret at BNP Paribas put it to Reuters:As Ken Wattret at BNP Paribas put it to Reuters:
“It cannot run the risk of disappointing markets, having raised expectations of action.”“It cannot run the risk of disappointing markets, having raised expectations of action.”
8.48am GMT08:488.48am GMT08:48
Euro hit by ECB stimulus talkEuro hit by ECB stimulus talk
The euro is weakening this morning, as speculation grows that the European Central Bank will announce significant stimulus measures next week.The euro is weakening this morning, as speculation grows that the European Central Bank will announce significant stimulus measures next week.
The single currency has slipped to just $1.06 this morning, near a seven-month low.The single currency has slipped to just $1.06 this morning, near a seven-month low.
And investors are betting that the euro will keep falling, as Mario Draghi unleashes new measures to drive growth and inflation.And investors are betting that the euro will keep falling, as Mario Draghi unleashes new measures to drive growth and inflation.
Bloomberg explains:Bloomberg explains:
Forecasters are cutting their year-end and first-quarter euro estimates at the fastest pace since March, when the start of the central bank’s bond-buying program sent the currency tumbling to a 12-year low. Options signal there’s a 70 percent chance the euro will match that low this year, up from 18 percent when the ECB last met in October.Forecasters are cutting their year-end and first-quarter euro estimates at the fastest pace since March, when the start of the central bank’s bond-buying program sent the currency tumbling to a 12-year low. Options signal there’s a 70 percent chance the euro will match that low this year, up from 18 percent when the ECB last met in October.
But it’s not clear what Draghi will do. He could boost the ECB’s QE programme, promising to print even more money to spend on government and corporate bonds.But it’s not clear what Draghi will do. He could boost the ECB’s QE programme, promising to print even more money to spend on government and corporate bonds.
Or he could impose even steeper negative interest rates on banks, to force them to lend rather than leave cash gathering dust at the ECB.Or he could impose even steeper negative interest rates on banks, to force them to lend rather than leave cash gathering dust at the ECB.
Steven Bell, London-based chief economist and director of macro strategies at BMO Global Asset Management, says:Steven Bell, London-based chief economist and director of macro strategies at BMO Global Asset Management, says:
“He’s going to pull a rabbit out of the hat -- we’re just not sure what that rabbit will be.“He’s going to pull a rabbit out of the hat -- we’re just not sure what that rabbit will be.
“The euro is going down heavily.”“The euro is going down heavily.”
Cute rabbit, though:Cute rabbit, though:
#Draghi will pull a rabbit of the hat, say euro watchers, but none knows what it'll be https://t.co/vaS9197ys2 #ecb pic.twitter.com/YD12xBYOzH#Draghi will pull a rabbit of the hat, say euro watchers, but none knows what it'll be https://t.co/vaS9197ys2 #ecb pic.twitter.com/YD12xBYOzH
8.37am GMT08:378.37am GMT08:37
The Resolution Foundation, a UK think tank, has warned that poor British families are still losing out, despite the tax credit reprieve announced in yesterday’s sutumn statement.The Resolution Foundation, a UK think tank, has warned that poor British families are still losing out, despite the tax credit reprieve announced in yesterday’s sutumn statement.
And that’s because of longer-term changes to the UK welfare system, which will bring in the universal credit.And that’s because of longer-term changes to the UK welfare system, which will bring in the universal credit.
Torsten Bell, Director of the Resolution Foundation, explains:Torsten Bell, Director of the Resolution Foundation, explains:
The attention now turns to the longer term changes to the welfare system the Government has put in train. All the post-2020 welfare cuts announced in the Summer Budget remain in place and will eventually affect millions of families as Universal Credit is rolled out nationally.The attention now turns to the longer term changes to the welfare system the Government has put in train. All the post-2020 welfare cuts announced in the Summer Budget remain in place and will eventually affect millions of families as Universal Credit is rolled out nationally.
“New Resolution Foundation analysis shows that these cuts fall overwhelmingly on poor working families.“New Resolution Foundation analysis shows that these cuts fall overwhelmingly on poor working families.
And this chart shows how low-earners are still set to lose out over this parliament:And this chart shows how low-earners are still set to lose out over this parliament:
Low-income working families on Universal Credit set to lose £1,300 https://t.co/n6igG9roK3 pic.twitter.com/2PqxDcv2tlLow-income working families on Universal Credit set to lose £1,300 https://t.co/n6igG9roK3 pic.twitter.com/2PqxDcv2tl
RF's distributional analysis just out suggests average loss for bottom half is £650 from all changes from Budget + SR, no loss in top halfRF's distributional analysis just out suggests average loss for bottom half is £650 from all changes from Budget + SR, no loss in top half
Updated at 8.49am GMTUpdated at 8.49am GMT
8.34am GMT08:348.34am GMT08:34
Osborne denies weakness over tax creditsOsborne denies weakness over tax credits
George Osborne has been conducting a whistle-stop media tour this morning - and sporting a distractingly high-vis jacket - to discuss yesterday’s spending review.George Osborne has been conducting a whistle-stop media tour this morning - and sporting a distractingly high-vis jacket - to discuss yesterday’s spending review.
There’s a lot of attention on his surprise tax credit u-turn - a sign of weakness, chancellor?There’s a lot of attention on his surprise tax credit u-turn - a sign of weakness, chancellor?
Apparently not. Osborne told ITV1’s Good Morning Britain from a building site that:Apparently not. Osborne told ITV1’s Good Morning Britain from a building site that:
“I don’t think it’s a weakness, if you are doing this job, to listen to people and listen to the concerns that are made.”“I don’t think it’s a weakness, if you are doing this job, to listen to people and listen to the concerns that are made.”
Spending Review Reaction, @George_Osborne talks to @GMB, #GMB pic.twitter.com/v67Eg2itteSpending Review Reaction, @George_Osborne talks to @GMB, #GMB pic.twitter.com/v67Eg2itte
8.27am GMT08:278.27am GMT08:27
The Agenda: ECB meeting looms; Autumn Statement falloutThe Agenda: ECB meeting looms; Autumn Statement fallout
Good morning, and welcome to our rolling coverage of the financial markets, the economy, the eurozone and business.Good morning, and welcome to our rolling coverage of the financial markets, the economy, the eurozone and business.
Coming up today, we’ll be mopping up economic reaction to Wednesday’s Autumn Statement and Spending Review.Coming up today, we’ll be mopping up economic reaction to Wednesday’s Autumn Statement and Spending Review.
The Institute for Fiscal Studies will give its verdict at lunchtime, and will show who really won and lost yesterday.The Institute for Fiscal Studies will give its verdict at lunchtime, and will show who really won and lost yesterday.
Already, some of the gloss is coming off George Osborne’s big day, with his own independent advisors admitting that the surprise windfall might not actually happen (awkward, as the chancellor has promised to spend it)Already, some of the gloss is coming off George Osborne’s big day, with his own independent advisors admitting that the surprise windfall might not actually happen (awkward, as the chancellor has promised to spend it)
Related: OBR admits uncertainty over £27bn windfall behind tax credit U-turnRelated: OBR admits uncertainty over £27bn windfall behind tax credit U-turn
It's a #spendingreview #tomorrowspaperstoday montage: https://t.co/eMlZoF01X9 pic.twitter.com/fehi2OKqpUIt's a #spendingreview #tomorrowspaperstoday montage: https://t.co/eMlZoF01X9 pic.twitter.com/fehi2OKqpU
In the markets, attention is turning to next week’s European Central Bank meeting when new stimulus measures could be laid out.In the markets, attention is turning to next week’s European Central Bank meeting when new stimulus measures could be laid out.
It’s Thanksgiving in America, so our US friends will be busy swapping bon mots over the turkey and preparing for theIt’s Thanksgiving in America, so our US friends will be busy swapping bon mots over the turkey and preparing for the
hellhell
joy of Black Friday. So it could be a quieter day....joy of Black Friday. So it could be a quieter day....