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To distract us from the excitement of who you will/wont see over Christmas the government is putting on a Spending Review tomorrow. What should you expect?
New economic forecasts will show this year& #39;s disaster wasnt quite as disastrous as @OBR_UK thought in July BUT economy will be over 10 per cent smaller this year than pre-crisis = biggest fall in over 300 years.
Main impact of brilliant vaccine news is reduced uncertainty about when a full recovery can get underway - it won& #39;t magic away lasting economic damage. Expect a permanent 2 to 3% GDP hit by mid 2020s = £1,000 for every adult (this is much lower than previous crisis)
Oh...and Brexit. @OBR_UK forecasts likely to show the permanent Brexit impact is bigger than Covid (quite a bit has already happened via lower incomes/investment). Given that it& #39;s decision time on deal/no deal may show how much difference that makes (both big hits to GDP)
Obviously 
https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Pfeil nach unten" aria-label="Emoji: Pfeil nach unten"> economy + https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬆️" title="Pfeil nach oben" aria-label="Emoji: Pfeil nach oben">govt spending = huge borrowing will be spelt out tomorrow. We expect it to be around £400bn. This is HIGHER than previously thought despite borrowing in recent months being LOWER. Why? 2nd lockdown + more public service cash + loans that& #39;ll never get paid
economy + https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬆️" title="Pfeil nach oben" aria-label="Emoji: Pfeil nach oben">govt spending = huge borrowing will be spelt out tomorrow. We expect it to be around £400bn. This is HIGHER than previously thought despite borrowing in recent months being LOWER. Why? 2nd lockdown + more public service cash + loans that& #39;ll never get paid" title="Obviously https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬇️" title="Pfeil nach unten" aria-label="Emoji: Pfeil nach unten"> economy + https://abs.twimg.com/emoji/v2/... draggable="false" alt="⬆️" title="Pfeil nach oben" aria-label="Emoji: Pfeil nach oben">govt spending = huge borrowing will be spelt out tomorrow. We expect it to be around £400bn. This is HIGHER than previously thought despite borrowing in recent months being LOWER. Why? 2nd lockdown + more public service cash + loans that& #39;ll never get paid" class="img-responsive" style="max-width:100%;"/>
We forget how huge the level of spending right now is: public service spending is probably up almost 50%. Total spend will approach 60% GDP in 2020-21 - we& #39;re talking the levels of 1943 and 1944...
The Chancellor is ignoring really difficult questions tmrw (ie longer term tax/spend) so focus is how much extra spending continues into 2021-22 (e.g for vaccine programme). This is very uncertain so we recommend creating a special covid reserve (as we do for wars)
When it comes to the impact on workers @OBR_UK will forecast unemployment peaking LOWER + LATER due to 1) smaller GDP hit 2) extension of furlough 3) OBR previously being at the extreme of pessimism expecting 12% unemployment by now. I& #39;d guess they& #39;ll forecast 8% during next year
A decision the govt should be taking tmrw is to scrap plans to take £1,000 from over 6 million low and middle income households next April - unemployment will still be rising then so it makes no macroeconomic sense (not to mention being a disaster for the families concerned)
Read more on what to expect from the Spending Review courtesy of @karlhandscomb @jackhleslie @carapacitti @JamesSmithRF @dan_tomlinson_ https://www.resolutionfoundation.org/publications/the-covid-state/">https://www.resolutionfoundation.org/publicati...
