Ben Zaranko

The great UK unemployment debate | The Observer Economists clash over whether weakness in the economy or structural changes to the labour market explain the spike in joblessness

I wrote for yesterday's @theobserveruk.bsky.social about what's happening to unemployment, and the important debate about where it's going next.

observer.co.uk/news/nationa...

NEW PODCAST: The Spring Forecast explained

@helenmiller.bsky.social, @benzaranko.bsky.social and @beeboileau.bsky.social discuss the Spring Forecast. We cover rising energy prices and what the big forecast uncertainties mean for government spending plans.

🎧 Listen here: ifs.org.uk/articles/spr...

This is true! Borrowing has already come down substantially from last year, and that often gets missed. But the question I'm raising here is whether that can be sustained, given the various policy and forecasting assumptions - I'd argue shaky assumptions - future plans are predicated on.

The government plans to reduce government borrowing by 2.5% of GDP over the next four years – a sizeable fiscal consolidation.

The question is now one of delivery. And past experience clearly shows that promising lower borrowing is easier than delivering lower borrowing.

More generally, it always felt risky for the Chancellor to seek to take credit for reductions in inflation and interest rates that are largely (though not entirely) due to factors beyond her control. She can hardly then complain if people blame her if/when they start going up.

One thought on Rachel Reeves' speech yesterday. If I were a Chancellor about to preside over a spike in inflation caused by a foreign war, I might have thought twice about attacking my predecessor for presiding over a spike in inflation caused by a foreign war. Surely a hostage to fortune.

NEW: “Today’s Spring Forecast did what it said on the tin… there was blissfully little speculation, and no tweaking tax or spending policies on the day. To her credit, she stayed her hand.” – @helenmiller.bsky.social

📗Read our response to the Spring Forecast here: ifs.org.uk/articles/spr...

In the short term, undoubtedly. But what the forecast says in the autumn will be far more significant

The OBR's central unemployment scenario has it rising to a little over 5 per cent then falling swiftly back. Bottom left panel has a scenario where (due to either technological displacement or higher labour costs) there's a structural increase in unemployment. One to keep an eye on in months ahead.

And that will get reflected eventually - for now, I can see why (without a Chair) they've decided to stick to their previous approach of waiting for new ONS population projections

bsky.app/profile/benz...

Sure. In the past, they've used ONS population projections (coming in April) as their starting point, and they have decided to stick to that approach. Deviating from that, without a Chair in place to own it, perhaps seen as too risky. That's my reading

OBR highlighting and subtly questioning the deliverability of the government's spending assumptions. A tight envelope and promises elsewhere would see "other" budgets cut by 4.4% per year after 2028/29.

The 2027 Spending Review is where these assumptions collide with reality.

Can't do a forecast without a net migration assumption, and legislation says they need to do two forecasts a year!

That might be reflected in the in-year number (/ the 2025 starting point). The bigger issue for the forecast is where it settles in the medium term and I can see why they'd sit on that for now.

Waiting for new ONS population projections + some of the policy details to be nailed down - they explicitly say they'll reflect this in the autumn

OBR have revised down their forecast for net migration but this is *entirely* due to an upwards revision in the number of outwards migration by UK nationals. Still potential for another downwards shift later in the year, if the inwards migration number also drops.

Borrowing outlook is effectively unchanged - though OBR forecasts have clearly been overtaken by events and sharp market movements. If nothing else, this shows why finely calibrating policy changes in response to minor forecast changes is stupid. Reeves deserves credit for making this a non-event.

One of the things I wanted to do with my recent fiscal rules paper was start a debate. This stuff is arcane but really important. So, I'm pleased that it's been discussed by Ed Balls and George Osborne on their podcast (even if they weren't terribly nice about it).

open.spotify.com/episode/2gOV...

There are lots of student loan proposals flying around. This stuff is complicated and contentious. Fortunately my colleague Kate Ogden has stepped in as the fifth emergency service, to explain what these proposals mean, who would win/lose, and how much they'd cost.

Less than a week left to apply for this, the most exciting job in UK fiscal policy available right now.

(Chair of the OBR is a close second).

app.beapplied.com/apply/4t6eys...

Fiscal rules aren’t working – we need a new traffic light... Fiscal thresholds are too constraining and make for facile public debate. It’s time to adopt a broader assessment

In a busy news week, I've written about the story on everybody's lips for today's @theobserveruk.bsky.social: the problems with the UK's obsession with "fiscal headroom" and the need to consider alternatives to pass-fail fiscal rules.

observer.co.uk/news/busines...

Some positive UK public finance news 👇

It now looks like borrowing for 2025/26 will come in not just lower than 2024/25, but lower than was forecast in November. The uptick in income tax receipts (including bumper January self-assessment returns) is a good sign and welcome news for the Chancellor.

NEW PODCAST: How to fix the fiscal rules

@helenmiller.bsky.social and @benzaranko.bsky.social examine our current UK fiscal framework and its issues, and explore an alternative approach using a traffic-light style system.

🎧️ Listen here: ifs.org.uk/articles/how...

Full thread

bsky.app/profile/benz...

Pleased to see this written up by the FT, and to see my driving analogy make the cut. We need to look beyond just the fiscal speedometer.

www.ft.com/content/c88b...

Finally, I’m enormously grateful to @jrf-uk.bsky.social and the ESRC for their financial support for this project, and to the many people inside and outside the IFS who have helped me develop my thinking on this. All mistakes are of course my own. [end]

Does the UK fiscal framework need a rethink? | Institute for Fiscal Studies An IFS event discussing new research on the UK fiscal framework, its limitations, and options for longer-term reform.

We have an @theifs.bsky.social event later today where I’ll be discussing this alongside a star panel: ifs.org.uk/events/does-...

It’s not too late to sign up for the livestream and send in difficult questions.

From fiscal rules to fiscal traffic lights: rethinking the UK fiscal framework | Institute for Fiscal Studies The UK’s approach to fiscal policy needs a rethink. The current framework, based around a set of pass–fail fiscal rules, isn’t working well.

You can read the full report here: ifs.org.uk/publications...

It’s not an argument that we should immediately abandon the fiscal rules. It’s not an argument that we should be borrowing more, or less. It's not a critique of this government specifically (it runs deeper).

It’s an argument that we should be approaching these important questions differently.

In sum: I think there’s a widespread, justified sense that the current fiscal arrangement isn’t working very well, but there’s been a bit of a dearth of credible alternatives. This is an attempt to fill that gap.