What could possibly go wrong, really….?
UK economy 'resilient' despite £122bn hit to finances.
The UK economy is "resilient" despite forecasts that government finances will be £122bn worse off than previously expected by 2020, the chancellor said. In his Autumn Statement Philip Hammond said growth predictions had been cut as a result of the Brexit vote. As widely expected, he unveiled a fuel duty freeze and more cash for housing, transport and digital infrastructure. Labour said the government was "unprepared and ill-equipped" for Brexit and had "no vision". Mr Hammond told MPs the UK's deficit would no longer be cleared by 2020 - with the target instead "as early as possible" afterwards. Mr Hammond said the statement - his first major Commons event as chancellor - came exactly five months after a Brexit vote which "will change the course of Britain's history", making it "more urgent than ever" to tackle long-term economic weaknesses. Presenting the Office for Budget Responsibility's forecasts, he said borrowing would hit £68.2bn this year and £59bn next year, compared with the March forecast of £55.5bn and £38.8bn. The OBR said the referendum result meant potential growth in the current Parliament would be 2.4 percentage points lower than forecast in March. Government finances are forecast to be £122bn worse off than in the spring.
Autumn Statement: Big increase in borrowing predicted.
There will be substantial increases in government borrowing in each of the next five years, according to the Office for Budget Responsibility (OBR). Chancellor Philip Hammond confirmed he would abandon the government target to spend less than it earned by 2019-20. The OBR predicts it will now borrow £21.9bn that year, compared with the £10bn surplus previously forecast. Overall, the government will borrow an extra £122bn by 2020-21, half of which the OBR attributes to the Brexit vote. There has also been a big change in its prediction for the total amount of government debt amassed by 2020-21. The new total is £1.95 trillion, an increase of £210bn from the £1.74 trillion the OBR predicted in March. Those figures include the amount of money the Bank of England is borrowing to support the economy via its asset purchase facility (APF). That money counts as part of national debt, but not as part of the net borrowing figure.
Supermarket prices 'to rise by 5%'.
Prices in the UK's supermarkets will rise by at least 5% over the next six months, according to the former boss of Sainsbury's. Justin King thinks that, after years of the cost of the weekly shop barely moving, we should expect to see inflation return. Mr King told Newsnight that the fall in the value of the pound would cause "a profound change" for supermarkets. He ran Sainsbury's for a decade until stepping down in 2014. In that time, the company's revenue grew almost constantly, but prices rose much more slowly. In recent years, food prices have even had spells of deflation. Mr King, now vice-chairman of the investment firm Terra Firma, says some supermarkets will be "squeezed in the jaws" of resisting price rises while also dealing with increased costs, and says some companies may not survive the squeeze. The value of sterling has fallen notably since the decision to leave the European Union. That's meant that ingredients and packaging imported from abroad have become more expensive, sparking some high-profile pricing rows over products such as Marmite. Mr King, who backed the Remain campaign in the referendum, says that "all things being equal", a return to inflation is inevitable. "Around 40% to 50% of what we buy is sourced abroad in a currency other than the pound, so with the current rates of exchange we could expect those things to be about 10% more expensive. And if that's about half of what we buy, then that means something of the order of 5% inflation." His claim has been backed up by the trade body that represents many suppliers. Ian Wright, director-general of the Food and Drink Federation, told Newsnight that he expected prices to rise next year by "somewhere between 5 and 8%".
Autumn Statement: Workers' pay growth prospects dreadful, says IFS.
The outlook for wages is "dreadful" with the squeeze on pay lasting for more than 10 years, independent economists have said. The Institute for Fiscal Studies (IFS) said workers would earn less in real wages in 2021 than they did in 2008. Other analysis shows the biggest losers between now and 2020 will be lower income families, with the poorest third likely to see incomes drop. Chancellor Philip Hammond said millions of new jobs had been created. Defending his Autumn Statement plans, the chancellor told Radio 4's Today programme that the government had brought job growth. It was investing for the future, preparing for a "rainy day", and government borrowing was on a "downward path", he added. In its analysis of the Autumn Statement, the independent think tank, the IFS, said workers would earn less in real wages in 2021 than they did in 2008. "This has, for sure, been the worst decade for living standards certainly since the last war and probably since the 1920s," said Paul Johnson, director of the IFS. We have seen no increase in average incomes so far and it does not look like we are going to get much of an increase over the next four or five years either." The "outlook for living standards and for the public finances has deteriorated pretty sharply over the last nine months", he added.
All details above from BBC News website.
[Well, after today’s vote in Parliament rejecting both of the amendments proposed by the House of Lords it looks like Article 50 might be enacted as soon as the weekend. I don’t think that it can be argued that there will definitely be ‘interesting times’ ahead. Of course the Brexiteers will be celebrating at this point. Needless to say I won’t be. Thankfully I don’t have any children to explain why we sold their future away on the promise to ‘take back control’ that we never had in the first place and still won’t have after we leave the EU in 2 years’ time. If this was another country committing economic suicide in an inexplicable fit of pique it might be interesting to watch from a distance. It’s rather less interesting when you’re actually inside the madhouse wondering what the fuck went wrong and why no one else can see what the likely consequences of their actions are. I guess we’ll see and I’ll be here to report it to you. Stay tuned!]