Autumn Statement - Barret Kupelian's reaction transcript

Transcript

We knew it wouldn’t be pretty. But the Autumn Statement demonstrates just how challenging the UK and international economic situation is.

The Chancellor had the unenviable job of striking a balance between reassuring markets by shoring up public finances in the medium-term, while not stifling economic growth.

In making these choices, the Chancellor largely chose a return to Treasury Orthodoxy. Many of the measures had been widely trailed. But much of the critical form and timing was not flagged up to such an extent.

Looking first at form, comparisons will be made between this Budget and George Osborne’s 2010 emergency budget. But the balance between tax rises and spending cuts is much more even this time around. 55% of today’s fiscal consolidation comes from spending cuts, compared to around three quarters in 2010.

On the timing, it’s telling that while many of the tax rises are imminent, the bulk of the spending cuts will come after the general election.

So where does this leave the economy? We were told there would be no ‘rabbits out of the hat’ . But the OBR’s growth figures are just that. They are less gloomy than the Bank of England’s forecasts, predicting a shorter recession and a faster recovery thereafter.

In practical terms, this means economic output is projected to return to pre-pandemic levels by the end of 2024. While better than many had predicted, it’s still a significantly worse performance than all other G7 economies.

According to the OBR, the average inflation rate will reach about 9.1% this year and 7.4% next year.

For households already struggling with the cost of living, all this adds up a 6.5% cut in real household disposable incomes relative to 2021 levels. This type of contraction has never been recorded in Britain’s post war history and means that public services will.

On a more hopeful note, the OBR assumption on the path of interest rates are higher than those of professional forecasters. If the view of professional forecasters prevails, then this could mean lower debt interest payments than those forecast by the OBR giving the government some wiggle room in the future.continue to remain strained as demand remains high.