A study carried out by economic think tank the National Institute for Economic and Social Research (NIESR) has suggested that the government’s Brexit deal will cost the UK £100 billion per year by 2030.
The study also indicated that Gross Domestic Product (GDP) will be 3.9% lower by 2030.
The NIESR predicts that, by the end of 2030, total trade between the UK and the EU will fall by 46%; the decline in GDP will cost each UK citizen £1,090; foreign direct investment will fall by 21%; and tax revenue will fall by between 1.5% and 2%.
Commenting on the study, Garry Young, Director of Macromodelling and Forecasting at the NIESR, said: ‘Leaving the EU will make it more costly for the UK to trade with a large market on our doorstep, and inevitably will have economic costs.’
Meanwhile, a separate study carried out by the London School of Economics, King’s College London and the Institute for Fiscal Studies (IFS) has suggested that the deal could leave the UK economy ‘as much as 5.5% smaller’ in a decade’s time.
Responding to the studies, a government spokesperson stated: ‘This deal will protect jobs and our economy, while respecting the result of the referendum.
‘It delivers an economic partnership with the EU closer than any other country enjoys, is good for business and is in our national interest.’
The Institute for Fiscal Studies (IFS) has suggested that Chancellor Philip Hammond ‘gambled’ with public finances in the 2018 Autumn Budget.
In its Budget analysis, the IFS stated that, whilst forecasts prepared for the Budget by the Office for Budget Responsibility (OBR) gave the Chancellor room for manoeuvre, public finance forecasts could ‘deteriorate significantly’ next year, leaving the government in a tricky position.
The Institute also warned that UK public services are ‘going to feel squeezed for some time to come’, and that cuts are ‘not about to be reversed’.
In regard to austerity, the IFS stated that we will ‘only really know’ when it is over when we have ‘firmer plans’.
Commenting on the Budget, Paul Johnson, Director of the IFS, said: ‘Mr Hammond will be thanking his lucky stars for the OBR. After all, who would have believed a Treasury forecast which just happened to allow more than £20 billion of additional spending on the NHS without either any tax increases or any effect on forecast borrowing?
‘And that really is the story of . . . [the] Budget. Lots of extra money for the NHS ‘paid for’ by better borrowing forecasts.’
The Institute for Fiscal Studies (IFS) has warned that the NHS will require tax rises in order to maintain the level of service it currently supplies.
In a recently published report, the IFS stated that, with an ‘ageing population’ and an increasing pay and drugs bill, individuals’ reliance on the health service will ‘only continue to grow’.
In order to sustain the NHS and fund increases in health spending, taxes would need to rise by between 1.6% and 2.6% – equivalent to between £1,200 and £2,000 per household, said the IFS.
It also revealed that funding increases of 4% per year will be required over the medium term to ‘secure modest improvements in NHS services’.
Commenting on the issue, Paul Johnson, Director of the IFS, said: ‘If we are to have a health and social care system which meets our needs and aspirations, we will have to pay a lot more for it over the next 15 years. This time we won’t be able to rely on cutting spending elsewhere – we will have to pay more in tax.
‘But it is a choice: higher taxes and a health and social care system which meets our expectations and improves over time, or taxes at current levels and a more constrained health service delivering less than we have become accustomed to.’
In its response to the Chancellor’s Spring Statement, the Institute for Fiscal Studies (IFS) has suggested that tax increases amounting to £30 billion per year will be needed in order to cut the UK’s deficit.
To avoid spending falling as a fraction of national income beyond 2019/20, Chancellor Philip Hammond needs to find an extra £14 billion per year by 2022/23, the IFS said. It also stated that Mr Hammond would require an additional £18 billion of tax increases or spending cuts by the mid-2020s to eliminate the deficit.
The think tank said that ‘dismal’ growth in productivity and earnings is the ‘new normal’, alongside ‘dismal economic growth’.
In his Spring Statement speech, the Chancellor stated that the UK economy has reached a ‘turning point’ in the nation’s recovery from the financial crash of 2008.
The Office of Budget Responsibility (OBR) forecasts that the UK economy will grow at a faster pace than previously anticipated, with GDP growth reaching 1.5% in 2018.
However, in its report, the IFS said that the UK has had the ‘worst decade of growth since at least the last war’, and suggested that growth projections for the next few years are ‘subdued’.
Commenting on the matter, Paul Johnson, Director of the IFS, said: ‘The big specific challenge facing the Chancellor . . . remains over how to balance growing demands for spending increases against his desire to balance the books in the mid-2020s.’
Responding to the IFS, a Treasury spokesperson said: ‘Our balanced approach has reduced the deficit while also cutting taxes for over 30 million people and investing in our vital public services.’
Research carried out by the Institute for Fiscal Studies (IFS) has suggested that mothers working part-time jobs are receiving ‘long-term pay penalties’ as a direct result of the gender pay gap.
The report found that, when compared to fathers, mothers spend less time in paid work and more time working part-time. The IFS said that, as a result, mothers miss out on the earnings growth that typically comes with experience.
Individuals in regular, paid work often see their pay rise year on year as they gain experience: however, the IFS’s research showed that part-time workers, many of whom are mothers of young children, are missing out on these benefits.
The Institute stated that the effect of part-time work in reducing wage progression is ‘especially striking’.
By the time a first child reaches the age of 20, mothers earn, on average, 30% less per hour than fathers, the research also suggested.
Commenting on the issue, Monica Costa Dias, Associate Director at the IFS, said: ‘There are likely many reasons for persistent gaps in the wages of men and women, which research is still investigating, but the fact that working part-time has a long-term depressing effect is an important contributing factor.
‘It is remarkable that periods spent in part-time work lead to virtually no wage progression at all. It should be a priority for governments and others to understand the reasons for this. Addressing it would have the potential to narrow the gender wage gap significantly.’
In a new report, the Institute for Fiscal Studies (IFS) has stated that Chancellor Philip Hammond may be required to abandon his target for eliminating the deficit if he is to increase spending on public services.
The government has stated its intention to move public finances into surplus by the mid-2020’s, with the Treasury reaffirming its commitment to reducing the deficit ‘while also investing in our public services’.
According to the IFS, productivity growth is likely to be cut – meaning that the deficit could increase significantly, potentially rising to £36 billion by 2021/22.
In the report, the Institute said that it would be difficult to see how Mr Hammond could stick to his deficit reduction targets and also respond to the ‘growing demands for spending’.
Commenting on the matter, Mr Hammond recently said: ‘We’ve already moved the target for balancing the books out from 2020 to 2025, but continuing to drive down the deficit in a measured and sensible way over a period of years… has to be the right way to go.’
Carl Emmerson, Deputy Director of the IFS, stated: ‘Public sector workers, the NHS, the prison service, schools and working-age benefit recipients, among others, would like more money. Even if Mr Hammond does find some, unless it did represent a very big change of direction, it won’t mean ‘the end of austerity’.
‘Given all the current pressures and uncertainties – and the policy action that these might require – it is perhaps time to admit that a firm commitment to running a budget surplus from the mid-2020s onwards is no longer sensible.’
The Chancellor will deliver the Autumn Budget on Wednesday 22 November.
The Institute for Fiscal Studies (IFS) has warned that the government’s target to increase the number of apprentices risks being ‘poor value for money’.
In a report on the matter, the think tank suggested that increasing the number of apprenticeships could ‘come at the expense of quality’.
The IFS also warned that the target could diminish the apprenticeships ‘brand’, changing it into another term for training.
From 6 April 2017, the government will introduce its new Apprenticeship Levy, which will bring significant changes to the funding of apprenticeships for all employers.
The Levy forms part of the government’s target to encourage the creation of three million apprenticeships in England by 2020.
However, the IFS has warned that the focus on targets could ‘distort policy’ and ‘lead to the inefficient use of public money’.
The Institute recommended that the government move away from ‘arbitrary targets’, advocating a more gradual expansion in the number of apprenticeships and a ‘stronger focus on quality’.
Neil Amin-Smith, Research Economist at the IFS and co-author of the report, commented: ‘We desperately need an effective system for supporting training of young people in the UK.
‘But the new Apprenticeship Levy, and associated targets, risk repeating the mistakes of recent decades by encouraging employers and training providers to re-label current activity and seek subsidy rather than seek the best training.’