Coffee House

The Autumn Statement in 7 graphs

6 December 2012

1. Growth evaporating. The Office for Budget Responsibility once again downgraded its growth forecasts for 2012-13 and, for the first time, also did so for 2014-16. Despite that, the OBR is still slightly more optimistic than the average independent forecaster:

2. A seven year slump. On the OBR forecasts, it will now take until the end of 2014 to get back to where we were before the crash. In the 1930s, it took ‘just’ four years to recover:

3. Slower deficit reduction. The weaker economic outlook means the government will be borrowing more than expected. When George Osborne delivered his first Budget in 2010, the OBR predicted he’d get the deficit down to £20 billion in 2015-16. It now says it’ll be £82 billion. The OBR does show the deficit falling this year, but only by the narrowest of margins: from £121.4 billion to £120.3 billion. And it’s worth noting that without either the £3.5 billion from the 4G auction or the OBR’s projection of £7.5 billion underspending by departments, the deficit would be rising this year. And it still might, as that £1.1 billion drop is well within the margin of error on their forecasts.


4. Meeting the fiscal mandate… The OBR has Osborne on track to meet his main fiscal rule: eliminating the structural current budget deficit within five years.

5. …but missing the debt target. But the Chancellor now looks likely to miss his supplementary target: to have the debt-to-GDP ratio falling in 2015-16. The OBR says it won’t start to come down until a year later.

6. 2013: a year of bad jobs figures. The last year has brought fairly good news on employment, with half a million new jobs and unemployment falling steadily from 2.7 to 2.5 million. But don’t expect it to keep coming next year. The OBR forecasts that employment will stay roughly flat until 2014, and a growing population means that unemployment will rise back up to 2.7 million. Even in 2018, the OBR expects 2.2 million people to be unemployed: 600,000 more than in 2008. Incidentally, it forecasts that government will shed 1.1 million jobs between 2010-11 and 2017-18, while the market sector adds 2.4 million.

7. The income squeeze goes on. Real earnings have fallen by 7 per cent since the recession hit, and won’t start to recover until 2014 according to the OBR. Relative to the Consumer Prices Index, they won’t recover to 2007 levels until 2018 – and relative to the Retail Prices Index they’ll barely have grown at all by then, still 6 per cent below pre-crash levels.

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  • swatantra

    Thats the way to do it George … in just 7 paragraphs. And spare us the details, just give us the gist of what measures you’re introducing. The economists will then explain in simple terms to the rest of us lay people what it all means on our pockets. Instead of 50 mins of a long winded speech we get only 5 mins.

  • Andrew N

    What’s the reasoning behind graph 6 (bad job figures), the graph displayed shows literally no pattern and no correlation with the now. It smells funny.

  • Baron

    The best thing one can say about the graphs is that they are colorful, expertly drawn and clearly presented. Sadly, every line of the forecast will be shown to be wrong, and wrong in the direction that will merely confirm we are not getting out of the hole yet.

    If the boys’ policies are to bring about a shift of resources from the public to the private sector, and it’s more than if given what we’ve seen so far, it will take longer than the predictions show. We are likely to remain down much longer, and the bad may even get interrupted with quarters badder than what we’ve been through lately, if Europe, China or the US were to go through their own, home engineered tightening.

    • telemachus

      The triple dip recession that Osborne omitted to mention

  • MrHeardBiz

    Thanks. Will use with my year 13s.

  • Daniel Maris

    I see the OBR have decided to recalibrate the fibometer.

    Graph 7 is meaningless, because what we really need is (a) a proper median or whatever it is average – the man in the street’s idea of someone on an average income (given the top ten percent have been coining it with huge increases in remuneration) (b) we need to factor in higher taxes and reduced benefits and (c) we need to subtract basic outgoings for housing and energy.

    Put it all together and I think the reduction in disposable income is much more like 20% in London and the South East.

  • Ian Walker

    Maybe there’s a tactical advantage to this. After all, the election message might be “We’re managing to turn the ship around, but it will take more hard decisions – do you really want to give the tiller back to the party that sent us so far off course last time?”

    OK, so the economy’s not doing so well. But consumer confidence, domestic business confidence and foreign investment confidence are all high – because Osborne is sticking to a plan rather than bowing to short-termist pressure from economic lightweights.

    If you make the next election about the economy, then Labour haven’t got a leg to stand on – 14 years of overspending and waste, versus 5 years of tough decisions and cool-headedness.

  • dalai guevara

    Danny Alexander confirmed on Newsnight yesterday that government was set to borrow £108bn this year. How does that compare to the £120bn you show in your graph? Both are OBR figures, surely?

    • Dimoto

      £11B transfer from the Bank (interest on QE bond purchases).
      Lots of the usual suspects (Merve again), have been issuing dark warnings that this sum should stay in the Bank to meet future losses on bond resale.
      But why would Osborne leave it there, a nice reserve to be blown away by a possible irresponsible chancellor Balls ?

      • dalai guevara

        I thought that transfer was in the order of £35bn. It is becoming increasingly clear that this is a made up quickfit hotfix.

  • HooksLaw

    1 The eurozone is in recession. America is falling of a fiscal cliff. Chinese growth is slowing.
    2. Hitler assisted us out of the recession in the 30’s. There are many more people in employment now than in the 30’s.

    3. Saying the deficit would be greater if departments spent more seems fatuous

    4. The structural deficit is on target to be eliminated? Good.

    5. Debt. See 1 above. The Chancellor wisely says, ‘Wehave not argued we should chase down a cyclical or temporary deterioration in the economy, particularly one which our own independent body says is largely driven by problems abroad.’

    This seems wise.

    6. Your graph projects rising employment and falling unemployment.

    • dalai guevara

      1. the other half of the world is not in recession. good?
      3 waste is waste, good investment is investment in growth
      4 really? on target?
      5 it’s all Europe’s fault. yawn
      6 which projections ever turned out to be true?
      7 my economy has shrunk by 27%, as the € is worth 20% MORE than 2008, or it has shrunk by 45% (7+38) if you are busy in China, or by 32% (7+25) if you have business with Brazil.

      • HooksLaw

        India Brazil Canada growth slows. Of course growth in India and China is from a very low base anyway. The world is slowing down.
        ‘The European Central Bank has slashed its eurozone growth forecasts and warned that recession will drag on into the middle of next year, sending the euro plunging below €1.30 to the dollar. ‘

        Grow up and acknowledge that under Brown debt ended up more than double what it should have been and thats before the crash which he never saw coming.
        Please spare us socialists taking about economics.

        • dalai guevara

          India, China, Germany, South Korea, Brazil all growing, some by DOUBLE digits – that’s a 3.5billion economy right there for you. Half the world.

          What is it with your socialist obsession? It blocks your thinking.

          • Dimoto

            Correct. And you have to be really deluded to believe that the US is about to collapse.
            For some reason, the usually bullish Hooks, has started spouting this global doom stuff.
            I guess that’s what happens when you start believing the wilder reaches of the internet (or that dreadful Cassandra, Merve the Swerve).

  • Archimedes

    This is like porn for nerds.

    P.S. Your can-do attitude really brightens the place up. Have you considered motivational speaking?

    • dalai guevara

      I may add to your misery: there is a £27bn black hole.

      • the viceroy’s gin

        …in your head?

        • dalai guevara

          for some, economics is pure fiction.

          • the viceroy’s gin

            …for some others, they’re just stupid.

            • dalai guevara

              mate, google £27bn black hole and observe the news pouring in…you obviously heard it here first.

              • the viceroy’s gin

                …mate, if you think the “black hole” is a measly 27 billion, then you’re stupider than I thought, and that’s really saying something.

                • dalai guevara

                  gotcha…I wasn’t going to say that because then you would have accused me of basing my economic figures on…pure fiction.

              • HooksLaw

                You are relying on Paul Johnson — ‘From 2004 to 2007 he was director of the public services and growth directorate and Chief micro-economist at HM Treasury, as well as deputy head of the Government Economic Service.’

                So he has a good track record then.

      • Archimedes

        Oh well…these things happen.

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