The Social Market Foundation’s response to 2016 Autumn Statement
- Autumn statement was ‘Osbornomics plus £100bn of extra borrowing’
- Driving immigration down further poses further risk to the public finances beyond OBR forecasts
- Previous OBR estimate puts £5.8bn per year cost on reducing migration
“Autumn statement was ‘Osbornomics plus £100bn of extra borrowing’”
Responding to the Autumn Statement, Social Market Foundation Director Emran Mian said:
“This was a continuity autumn statement – deficit reduction while delivering the manifesto and a productivity plan.
“It’s essentially Osbornomics plus £100bn of extra borrowing.
“We must wait for the major policy changes – for instance, the new industrial strategy – as well as the Government’s plans for Brexit.
“There is a risk that driving immigration down to ‘tens of thousands’ could cause the public finances to deteriorate even further than the OBR’s new forecasts predict.”
“OBR forecasts don’t cost in key policy ambitions – such as lowering immigration – which could weaken public finances”
Responding to the Autumn Statement, Social Market Foundation chief economist Nida Broughton said:
“The borrowing forecast has deteriorated since March, and the Chancellor has, as expected, been forced to abandon plans to eliminate borrowing by 2020. That’s partly because tax revenues are continuing to disappoint. But the OBR also ascribes £59 billion of extra borrowing over the next five years – around two-thirds of the overall deterioration before giveaways announced today are taken into account – to changes related to the referendum and our impending exit from the EU. Lower migration and lower growth are expected to weaken the finances.
“Forecasting five years ahead is always very difficult. It’s even more uncertain this time round because we don’t yet know what the outcome of EU negotiations and future policy will be, and neither does the OBR. For instance, the OBR has not yet costed in key policy ambitions like reducing migration to the tens of thousands – which would weaken the public finances. We also know little about what our future trade agreements will look like. With uncertainty ahead, Philip Hammond is wise to give himself more flexibility in his targets to repair the public finances.”
“OBR figures suggest cutting immigration to ‘tens of thousands’ could cost extra £5.8bn in borrowing a year by 2021”
Today’s OBR documents don’t assess the impact of reducing migration to the ‘tens of thousands’. But a past OBR assessment – from Budget 2016 – shows that doing so would incur an extra £5.8 in borrowing a year by 2020-21.
SMF chief economist Nida Broughton commented:
“In today’s assessment of the public finances, the OBR assumes that migration will be lower because we are leaving the EU but it does not go as far as estimating the likely impact of reducing migration to ‘tens of thousands’, which is the government’s stated ambition.
“However, the OBR’s last report, from Budget March 2016 suggests that getting net migration down to a level of 105,000 a year could cost an extra £5.8 billion in borrowing a year by 2020-21.
“This is above and beyond the £5.9bn a year by 2020-21 which today’s OBR assessment estimates as a result of lower immigration following the referendum vote.”