I've written for this week's @theobserveruk.bsky.social about economic forecasts and how they are (mis)used. observer.co.uk/news/politic...

Amidst ceaseless discussion of possible tax rises, it's worth remembering that spending cuts could be part of any Budget consolidation package. One challenge is that detailed department-level spending plans up to 2028–29 were agreed only in June... We've looked at the options 👇

This is the point. Policy *should not* be adjusted or fine-tuned in response to minor forecasting judgements. Decisions about whether or not to break a prominent manifesto promise *should not* depend on minor forecasting judgements. This stuff matters. We've got to do better than this.

I know it’s always like this. But one striking thing from the budget kite flying and kite pulling back in, is how major policy decisions are constantly being buffeted around by iterative forecast changes. All feels a bit of a silly way to be making major economic policy & political decisions.

The OBR have now confirmed that they've used the 10 working days before 21 October for their debt interest forecast. Here's my precise graphical depiction of what was happening to yields in that period. Suspect this is why the fiscal forecasts are reported to improved.

Your regular reminder that, while it doesn't have every policy option under the sun, @theifs.bsky.social Be the Chancellor tool will tell you how much could be raised from a whole raft of policy changes (e.g. cutting higher-rate threshold by £10k raises ~£17bn). ifs.org.uk/be-chancellor

This is the issue with our current fiscal framework and policymaking equilibrium. It's why, once (if?) the UK gets its house in order (i.e. gets to current/primary surplus), we should consider alternatives to pass-fail rules assessed against the point estimate of an uncertain, moving forecast.

I'm not sure it's an altogether positive development that the bond market now features so heavily in UK political coverage. But we are where we are, and if you'd like to understand it better, this podcast is for you.

Here's an extraordinarily cynical take: did the government talk up the likelihood of a manifesto-breaking income tax rise in the knowledge that it would push down gilt yields in the window the OBR will use for its forecasts? Rowing back now pushes up yields but too late to enter the forecast on 26th

Considerable risks with this approach: 1) revenues more uncertain; 2) greater risk of damaging economic impacts; 3) lots of angry interest groups, makes U-turns more likely; 4) viewed less favourably by bond market investors, many of whom were expecting an income tax rise.

I'm not sure it's an altogether positive development that the bond market now features so heavily in UK political coverage. But we are where we are, and if you'd like to understand it better, this podcast is for you.

Absolutely delighted that our @theifs.bsky.social work evaluating the effects of Sure Start centres won the "Publication of the Year" prize at last night's @smartthinking.bsky.social awards! It's wonderful to be recognised for the quality and impact of our work. ifs.org.uk/publications...

🚨Economics students! People who know or teach economics students!🚨 The IFS offers summer internships each year. Many of our permanent staff started with one of these. On Monday we're holding an online event to provide more info. Please do come/share. ifs.org.uk/events/ifs-r...

Very much one for the fiscal nerds, but important: Bank of England analysis suggests that by pushing down yields, Quantitative Easing (QE) allowed the government to borrow on better terms, on a long term basis, producing fiscal benefits that offset at least some of the headline QE-related losses.

An interesting piece which (rightly in my view) puts policy uncertainty front and centre. But I'm less convinced by the proposed policy prescription: if we kept a 2nd forecast, but don't formally assess rule compliance, what stops everyone else just reading off the OBR spreadsheet?

One reading of this remark is that the fiscal rule requiring debt to be falling as a share of GDP in 2029/30 is now the one that binds (as cuts to capital spending wouldn't help to meet her borrowing rule). That's entirely possible - and was what we predicted in the IFS Green Budget, as it happens.

Great to see @tomcalver.bsky.social using this IFS chart in his (excellent) piece about the UK's economic and fiscal travails. The combination of low growth and high debt interest really does make for some unpleasant fiscal arithmetic. It's a tough time to be Chancellor.

For this week's @theobserveruk.bsky.social I've written about one of my favourite topics: the productivity of the public sector, how it's measured, why it tends to grow less quickly than productivity in the private sector, and what it means for policy. observer.co.uk/news/busines...

Why not ease into the weekend with a 45 minute discussion of the UK's VAT system? VAT is a good tax in principle, but our system is riddled with oddities and inconsistencies which reshape the prices we pay in the shops and the economy we get. We could do better.

The IFS has calculated that the effective carbon price on household use of gas is negative, thanks to its lower VAT rate. ifs.org.uk/articles/tax.... This obviously sets back the carbon transition. Let's hope the Government is looking to make this better!

Lots of hints in Rachel Reeves' speech (e.g. at broad-based tax rises, a chunky OBR productivity downgrade, an increase in headroom) but nothing concrete. It was largely a scene-setting and blame-shifting exercise. Until we see the detail on 26 November, there's not much we can say.

🚨 OUT NOW 🚨 Does the OBR really run Britain? 💼 Former chancellor Jeremy Hunt, Labour MP @jeevunsandher.bsky.social, and the IFS's @benzaranko.bsky.social join @alaintolhurst.bsky.social to discuss whether the Office for Budget Responsibility is too powerful 🎧 Listen now: pod.fo/e/347deb

What's that, you say? You want another long, nerdy podcast about an antiquated part of the UK tax system that desperately needs reform? You're in luck

We're giving the people what they want: more than an hour of content about how we could better tax wealth in the UK. Do listen/watch and let us know what you think.

Rachel Reeves is about to get bitten by the productivity hedgehog. A bigger-than-expected OBR downgrade means a bigger-than-expected consolidation will be needed to meet the fiscal rules. Makes it harder to honour manifesto tax promises, and harder to build in more ‘headroom’.

The Conservatives’ “golden economic rule” requires that for every pound of spending cuts, at least half goes towards reducing borrowing. That’s an overly rigid policy rule. I can also imagine scenarios where it makes tax rises more likely - which presumably wasn't the intention.

I've written for @theobserveruk.bsky.social about Kemi Badenoch's "golden economic rule" and Nigel Farage's promise that a Reform government would "never borrow to spend". I doubt either policy would survive contact with the real world. You can read here: observer.co.uk/news/opinion...

Not the world's most sophisticated piece of analysis, but extrapolating lacklustre NHS improvements since last year's election suggests the government's waiting time targets won't be met. (Max wants me to point out that he has also done some sophisticated analysis ifs.org.uk/publications...)

I always enjoy reading Simon's thoughts, but I think this misses two big things. 1) What this thermostat analogy misses is that the act of constantly fiddling with the dial (volatility in tax and spend policy) is itself damaging - in particular because it ramps up uncertainty. That's one ...

Some big reductions in gilt yields in recent days. It's unclear whether the OBR have already closed their forecast window or not, and so unclear whether it will feed directly into Budget calculations, but it's good news for the Chancellor regardless.

The point my colleague @nickridpath.bsky.social makes here is an important and puzzling one. Given decent growth and (especially) higher-than-expected inflation so far this year, we'd expect receipts from e.g. VAT and income tax to be higher also. But no sign of that yet... Which is odd.

If there's one key message for the Chancellor from our analysis published today, it's this: Doing a bigger package to increase ‘headroom’ wouldn’t be costless – but nor is limping from one forecast to the next under constant speculation that policy will be tightened again.

There will be lots of speculation about tax over the next 6 weeks, for better or worse. This chapter is a plea for the government to think about how to make the system work better, rather than just raise the taxes which pose fewest short-term political hurdles. Some highlights:

Re-bumping this article, which is in print today. Particularly pleased with this paragraph.

The government is talking up the importance of ‘contribution’ and is planning a new ‘Unemployment Insurance’ benefit. What might that mean in practice? Well, for one thing, it might save the Treasury a few billion… Some great new work: ifs.org.uk/publications... With summary thread here 👇

I've written about the UK's productivity problem for @theobserveruk.bsky.social. Come for the comparison of the UK economy to a hedgehog, stay for the comparison of Rachel Reeves to a Dickens character. observer.co.uk/news/busines...

I did think it was weird that inflation was proving stubbornly high, but VAT receipts were coming in surprisingly low... Good news for Rachel Reeves

On 17 October, I'll be the least impressive panel member at this event at the LSE, debating the role of independent institutions and technocrats in guiding UK fiscal policy. If that sounds like your idea of a good Friday night, sign up here: www.eventbrite.com/e/a-sustaina...

On 16 October we're launching this year's IFS Green Budget, looking at the major challenges & choices facing the Chancellor this autumn. Sign up for our event! Analysis from IFS & Barclays, plus reflections from Jonathan Haskel & Andy King. It'll be great. ifs.org.uk/events/ifs-g...

There are some eye-popping stats in this new report from my IFS colleagues. Here's just one: 10% of teenagers now receive child disability living allowance (CDLA), up from 5% a decade ago. Just a remarkable change.

On the question of one vs two OBR forecasts per year... The IMF said first best option would be to operate with more ‘headroom’. They did not call for one forecast. They suggested that the rules could be assessed only once per year, but explicitly said that two forecasts per year is best practice!

Some great charts in this report. This one is my favourite. The UK has signed up the new NATO commitment to spend 3.5% of GDP on defence. The scale of the increase is fiscally challenging, and we've given ourselves a decade. Poland, on the other hand, has done it in just two years.

Three years on from Liz Truss and Kwasi Kwarteng's mini budget, I've written for @theobserveruk.bsky.social about its legacy and the lessons the Chancellor, her team and her backbench MPs (including would-be MPs) should keep in mind this autumn. This point is especially important.

Key charts from a great thread. Careful analysis by my @theifs.bsky.social colleagues shows that the two-child benefit limit has had no detectable impact on school-readiness at age 5, including among the poorer children most likely to be affected. Key policy takeaway: scrapping the ... [1/3]

Not a surprise, but no less significant for that: this OBR decision will shape much of the fiscal arithmetic this autumn. The other big Budget-relevant decision this week lies with the Monetary Policy Committee, who will decide whether to continue with active bond sales. 1/3

A key factor at the next election will be the state of Britain's public services. That will depend on whether the government can make those services more productive, to deliver more without huge cash injections. Join our @theifs.bsky.social event on Friday to hear more: ifs.org.uk/events/how-a...

This is worth reading. Our current fiscal framework and policymaking process has shortcomings and it’s good for this stuff to be debated. The proposed reforms to monetary policy are far more radical than the suggested fiscal rules “rewrite”, though, so the framing is a bit odd 🧵

We are just the only country stupid enough to discuss "black holes" every time yields rise 10bps

Good column. Worth emphasising that the government does deserve blame for the 2nd of these, for choosing to have a pass-fail fiscal rule and aiming to meet it almost exactly (with ~zero "headroom"). Means macroeconomic or gilt market volatility --> policy volatility and tax speculation.

This is a weird line. Whatever you think of Rachel Reeves and her broader record, she very much did tweak the fiscal rules, and she very much did announce an increase in capital investment.