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Thread on the return of austerity 
Some are arguing that, due to this week's Spending Review from @RishiSunak, austerity is back.
Is it?...1/
Some are arguing that, due to this week's Spending Review from @RishiSunak, austerity is back.
Is it?...1/
....We've obviously got the well-discussed foreign aid cut and the freeze in the pay of many public sector workers...2/
...And on a more macro level, day-to-day department spending limits in cash terms have certainly been cut relative to the March Budget...3/
...And work by @TheIFS shows, if you factor in all the real terms spending increase promises beyond 2021-23 made already to health, schools and defence the amount available to all other “unprotected” departments will fall slightly in real terms in 2022-23...4/
...And on the tax side the chancellor gave councils the ability to raise council tax by 5% next year.
Nothing (perhaps conveniently) appears on the Treasury scorecard, but the OBR's report shows that move raising around an extra £1bn each year...5/
Nothing (perhaps conveniently) appears on the Treasury scorecard, but the OBR's report shows that move raising around an extra £1bn each year...5/
...So there clearly are tax rises and spending cuts, which one can reasonably describe as austerity, though it’s plainly not on the scale of the post 2010 consolidation...6/
...And this assumes Sunak will stick to this week’s envelope.
He could very well spend more than these plans.
It’s widely assumed he will, in the end, extend the £20/week Universal Credit increase that expires in April...7/
He could very well spend more than these plans.
It’s widely assumed he will, in the end, extend the £20/week Universal Credit increase that expires in April...7/
...My view is that he’s mainly SIGNALLING austerity rather than fully committing to it – perhaps hoping the economy will recover more strongly than the OBR’s central scenario, reducing the implied fiscal hole automatically...8/
....Is this wise?
Well, it’s certainly better than cutting hard or raising taxes significantly now, which no economist would recommend...9/
Well, it’s certainly better than cutting hard or raising taxes significantly now, which no economist would recommend...9/
...But we should beware this whole framing of austerity/not austerity.
As @IPPR and @ResolutionFoundation have argued, there’s a case for additional STIMULUS spending now, to HELP the economy recover...10/
https://www.ippr.org/research/publications/chancellors-challenge https://www.resolutionfoundation.org/press-releases/200-billion-stimulus-package-needed-to-secure-britains-economic-recovery/
As @IPPR and @ResolutionFoundation have argued, there’s a case for additional STIMULUS spending now, to HELP the economy recover...10/
https://www.ippr.org/research/publications/chancellors-challenge https://www.resolutionfoundation.org/press-releases/200-billion-stimulus-package-needed-to-secure-britains-economic-recovery/
...This is more complicated than in 2010 because of the virus – you don’t want to stimulate in a way that spreads infections (see Eat out to Help Out)....11/
...But the essential argument is the same – if you can close the economic output gap (which the OBR sees persisting over the next four years)...12/
...SOONER through additional state spending or tax cuts NOW you HELP the public finances in the medium term by increasing GDP and tax revenues relative to otherwise....13/
....There's a danger that the "consolidation or not" argument pulls attention away from the "stimulus or not" argument...14/
...More here from me for @indypremium
ENDS/ https://www.independent.co.uk/independentpremium/news-analysis/austerity-spending-review-sunak-cuts-b1762377.html
ENDS/ https://www.independent.co.uk/independentpremium/news-analysis/austerity-spending-review-sunak-cuts-b1762377.html
