My latest @heraldscotland.bsky.social article: why the BoE decided to wait, and why the UK Govt ought to be exploring how to design a targeted scheme rather than a repeat of 2022's blank-cheque approach
www.heraldscotland.com/news/2599742...
How is the Iran War affecting inflation expectations and the public finances? And what do the increases in gilt yields affect the context of any UK Government response?
Read our analysis below:
fraserofallander.org/the-iran-war...
Absolutely! If anything, this just highlights how much erosion of welfare payments is baked into the uprating mechanism, and has in fact been happening for a long time
The average taxpayer would be paying additional rate - so yes, a massive increase because of the compounding effect.
Whether it'll happen or not is another matter - but it's what the default uprating mechanism would imply, which is what I would call unchanged policy
Glad to see this in the public debate! Of course as you say Chris, it implies a steadily increasing tax share of GDP - but that's essentially baked into the uprating. And it makes any proactive tax rate increases to close any gap opened up by poor productivity growth much more believable
Especially given the Public Spending Audit - remember that? - when they excoriated the previous government for **checks notes** not budgeting properly for the asylum system
Now, reasonable people can disagree with the balance between some of these and their necessity, and with points about looking at manifestos officially in advance. But the critique here is fundamentally unfair and downright weird
3. The fiscal rules really are extremely loose, and even then are only barely projected to be met. That's not prudent fiscal management.
4. There is another way to fund spending that Will Hutton ignores, of course: raising taxes. Like income tax, for example. It's the *borrowing* that's the issue
the full budget, not the current budget only. And you can't sell PSNFL; only actual cash debt. These accounting metrics may seem sensible in the abstract, but in reality they have been gamed to maximise borrowing and debt accumulation while appearing constraining
1. You can't just pile on debt forever by worsening your primary balance. The current govt has done nothing to build fiscal space and actually bring borrowing and debt accumulation down.
2. Not "counting" borrowing to invest in the main borrowing metric is a fiction. You still have to balance...
This is such a bizarre column that fundamentally misunderstands what Richard Hughes said at the parliamentary hearing. It's not that the Government can't spend more - of course it can. But what Hughes said was different altogether, and much more sensible
observer.co.uk/news/opinion...
6/ The conclusion of the OBR analysis has always been that taxes have to go up if we want higher spending.
But this shows that tax **rate** increases need not be as big as they first appear, and are much more deliverable.
Hardly a transparent way of doing it, but it does raise a lot of revenue!
Chart showing that a combination of lower health spending and higher productivity growth (1% a year) would be enough to put debt back on a sustainable path
Chart showing that with a 3p basic rate of income tax increase, only one of higher productivity growth or lower health spending growth is necessary to put the public finances on a sustainable footing
5/ The good news is that the scale of the challenge is smaller than it seems because fiscal drag does so much. Pick 2 of:
- A modest boost to productivity (1% a year);
- Bearing down a little bit on non-demographic health costs;
- A 3p increase in the basic rate.
And the path looks much better
Chart showing that productivity growth in the UK has fallen from over 2% a year in the run up to the 2008 crisis to 0.5% since then. The OBR's 2024 assumption was 1.5%, and we think the new 2025 assumption means 1.25%. Our (FAI) assumption is 0.7%
Chart showing indexation with CPI puts debt on a sustainable path, but lower productivity growth (0.7%) and a higher R-G (1ppt) mean that it returns to the OBR's explosive path
4/ Does this mean there are no fiscal sustainability issues? Not quite, but for different reasons. Poor productivity growth (our old friend) is to blame, and we are back on an explosive debt path once we account for that
3/ It's important to note that this is the default indexation mechanism, and would require no change in policy. The OBR assume uprating occurs by average earnings, which turns off fiscal drag.
But in my view, that isn't consistent with keeping policy unchanged - CPI is the default mechanism already
Chart showing that unlike under average earnings indexation, by 2073-74 the average earner's income would be subject to the additional rate due to CPI indexation leading to lower growth in thresholds
2/ Why? Because CPI inflation is lower than long-run average earnings growth, and so more people get dragged into higher rates of tax.
Using the OBR long-term assumptions, by the 2060s the average earner would pay the additional (45%) rate **even if thresholds are no longer frozen from 2030-31**
1/ This latest piece I've worked on is a reassessment of the implications of some of the OBR's long-term assumptions on indexation and what it means for fiscal sustainability.
Key point: fiscal drag is a feature, not a bug, and taxes are already going up even when thresholds are no longer frozen
When ministers say the Scottish Budget is balanced, is it a meaningful statement? Have they been plugging gaps with borrowing and non-recurring funding, including in the ABR?
Welcome to our Budget Report preview series - look out for more in January!
fraserofallander.org/scotlands-bu...
This is fantastic
8/ Full working paper with detailed analysis, information asymmetry breakdown, implementation details, and responses to objections:
www.strath.ac.uk/media/1newwe...
7/ It's pragmatic reform. Uses existing timings. No new institutions required.
But it addresses the real dysfunction exposed by the 2025 Budget process.
6/ This would:
✅ Level the playing field—everyone gets the same baseline info
✅ Enable informed public debate about fiscal choices
✅ Remove the OBR from impossible political judgments
✅ Replace 3 months of information warfare with 3 weeks of transparent discussion
5/ But what if we let the OBR publish its pre-measures forecast 3 weeks before Budget Day?
It's the same timing it currently delivers internally to the Treasury.
Then give the government 3 weeks to respond with policy measures.
4/ This isn't just about transparency. There are real economic costs:
📉 Market volatility from 3 months of selective leaks
📊 Business decisions delayed due to uncertainty
🗳️ Democratic deficit—opposition & public can't scrutinise without proper information
3/ An unmistakable pattern from August to November 2025: articles with Treasury briefing, all using the same coded language:
-"allies of the Chancellor"
-"people familiar with the matter"
-people "briefed on her thinking"
A drip-feed of selective briefings, knowing the OBR had no right of reply.
2/ In my 5 years at the OBR, I saw this repeatedly.
The OBR cannot comment before Budget Day. The Treasury can—and does—selectively brief the media to shape the narrative.
The OBR has no right of reply.
1/📄 New working paper
www.strath.ac.uk/media/1newwe...
On 4 Nov, the Chancellor heavily hinted Labour might break its manifesto and raise income tax. Nine days later: plan dropped, blamed on "better than expected OBR forecasts."
Those forecasts were delivered 5 days BEFORE her speech.
Thread 👇
I know - it does sometimes feel like folk won't really understand why having credible plans and a significant buffer is important until a new crisis rears its head.
The £21.7bn isstill be below the average OBR forecast error that far out, and that's with some impossible tightening built in
Our view - the £22bn headroom is a fiscal fiction. Allowing for fuel duty freezes and discounting non-credible spending cuts, it's more like £15bn - so not much higher than before, and not enough for normal forecast uncertainty
