Silly forecasts

The IFS claimed this will be the worst decade for real incomes. They did not stress what their figures showed, that there was a big hit to real incomes and living standards thanks to the banking collapse and the Great recession, which extended into the first couple of years of this decade, to be followed by some recovery. Nor did it go along with the OBR and stress that on their figures, which are pretty gloomy still, real incomes are estimated to rise every year from here for the full forecast period.

There was no reminder to the public that the October retail figures showed stonking growth at 7.1% more volume than in October the previous year. Nor did they pause to ask why retail prices were still lower this October than last October, given the substantial decline in the pound that has occurred over that time period, with much of it taking place well before the referendum. The current fashionable pessimistic forecasts say that family incomes will be squeezed by rising prices next year and the year after. This will lead to a drop in consumer spending, presumably to lower retail sales, and to a decline in economic activity. The lesser version expects a squeeze which slows the economy but which still allows some growth overall and in retail activity.

These forecasts usually come from  people who confidently forecast a recession this winter on the back of any vote to leave. Now they say what matters is the sending of the letter to leave, rather than the decision itself. Doubtless if and when the economy does not shrink when the letter is sent, they will shift their ground to saying it will shrink when we do actually leave.

There were two surprises in the OBR figures which suggests a few second thoughts about the alleged damage of Brexit. First, they now expect a stronger performance from the UK economy in 2016 than before the vote. Second, they expect 2.1% growth in the year they think we will leave, 2019, which is the same gr0wth rate as they forecast well before the referendum. I agree with those two forecasts.

The government is pledged to raise living standards, especially for the lower paid. To do so it will take more people out of Income Tax altogether, introduce universal credit which makes it more worthwhile working than the system it replaces, and boost the living wage.