IFS says workers face 'dreadful' decade without real-terms increase in wages - Politics live

Rolling coverage of all the day's political developments as they happen, including reaction to the autumn statement and the IFS press conference

• Philip Hammond's morning interviews - Summary
• John McDonnell's morning interviews - Summary
• IFS warns of biggest squeeze on incomes for 70 years after Brexit
• Afternoon summary

5.08pm GMT

We can look at the outlook for family incomes in the coming years, and it paints a grim picture. Our new income forecast brings together lower earnings growth, higher inflation, and tax/benefit changes. It shows that overall, the rest of this parliament looks set to be as grim as the last, with incomes growing by an average of 0.2 per cent a year, compared with 0.5 per cent a year between 2010-11 and 2014-15. While top earners were hit the hardest following the financial crisis, the big difference looking forward is that the biggest losers are lower income families, with the entire bottom third of the income distribution set to see incomes fall in the years ahead.

The next two years are going to be incredibly difficult. And I think the time is now for trying to put some measures in place to try and help health and social care through those next two years.

There's three elements. One - hospital provision, under-funding of hospitals, waiting times and STP - sustainability and transformation plans, which are putting at risk a lot of A&E departments all around the country.

The second element is social care, under-funding of social care, the need to improve social care and improve the way in which we treat care workers. They're vital, valuable, very responsible and very well experienced people. They should be treated better and paid better.

4.28pm GMT

Number 10 has hit back at the IFS. It says that if you look at disposable income, not wages, then people are getting better off.

These are from Huffington Post's Paul Waugh.

No10 hits back at IFS, says real household disposable incomes will rise by 2.8% by 2021.

PM'S spokeswoman: IFS looks at wages but better to look at net income."If you look at livings standards they're at their highest ever level"

4.06pm GMT

Open Britain, the group campaigning to keep Britain in the single market, has put out a statement from Labour's Chris Leslie saying the IFS analysis shows that the economic warnings about Brexit issued during the EU referendum campaign were accurate. He said:

This is clear proof that the Brexit vote has made working families worse off. The irresponsibility of leave campaigners was breathtaking - they should now be admitting that economic warnings made during the campaign were not Project Fear; they were Project Fact.

Their promises that Brexit would make Britain better off now appear naive and complacent.

4.00pm GMT

Iain Duncan Smith, the Conservative former work and pensions secretary, told BBC News this afternoon that he did not accept the IFS claim that workers face the longest squeeze on wages for 70 years. Asked about its analysis, he said:

Well, actually, I'm surprised because wages are increasing, they're increasing now, they're increasing across the board and well above inflation. Yes, there was a period when they were absolutely static. But over the last two, two and a half years, wages hae been increasing and the forecasts all the way have been that wages will continue to increase. So I don't recognise this dire prediction of no increase at all since the crash.

My sense about this is that the UK economy is already confounding the forecasts. All the forecasts, from the IFS and from the OBR and everybody else, all said that we were going to see a downturn immediately after the Brexit vote. We haven't seen that. The is growing faster than they predicted. We just saw the debt fall three days ago, when they predicted it would rise. So my sense about this is we are into territory where nobody really knows that the future holds.

3.34pm GMT

Here is John McDonnell, the shadow chancellor, on the IFS analysis.

This lost decade for living standards is unprecedented in modern British history and is a damning indictment of the total, abject failure of the Tories' economic policy during their six wasted years in office. The so-called 'long-term economic plan' has meant long-term decline in living standards for working people even as the super-rich and the big corporations are given large tax giveaways.

Chancellor Philip Hammond promised action in the autumn statement for those 'just about managing'. Instead he has betrayed them by continuing to slash in-work benefits, failing to raise the 'national living wage' to the level promised, failing to deliver more funding for our NHS and social care and now he's threatening pensioners with removing the 'triple lock'.

3.13pm GMT

The IFS has now put up on its websites its distributional analysis slides (pdf).

This one shows the impact of all tax and benefit reforms since the 2015 election. They are highly regressive. The gains in the autumn statement (the light green bars) were very modest, and came nowhere near compensating for the impact of the benefit cuts announced by George Osborne last year.

2.58pm GMT

And here are two more important charts from one of the IFS slideshow presentations (pdf).

This one shows the impact the government's benefit freeze was going to have on families with inflation forecast to grow at the rate expected in March.

If PM really wants to make families who're having a hard time make ends meet feel better off, she has huge job if these estimates are right

2.48pm GMT

Here is a chart from one of the IFS slideshow presentations (pdf) showing debt as proportion of national income going back to 1700. It has been much higher before, but the two previous peaks were caused by the Napoleonic wars and the second world war.

2.26pm GMT

And here are some more lines from the IFS briefing.

From my colleague Katie Allen

The @TheIFS detailed analysis of outlook for living standards suggests younger have been and will be harder hithttps://t.co/G9ESySE18R pic.twitter.com/uP0RP2sp5i

The @TheIFS notes that majority of giveaway from yet another fuel duty freeze from the govt goes to better off half of households

Don't worry, says the IFS, public debt *has* been higher than this in the past. During World War Two. Oh and during the Napoleonic wars.

And the verdict from the IFS is in: "The big losers from tax & benefit reforms during this Parliament will be low income families."

Big caveat from the IFS: Lots of uncertainty here. We could get a "positive shock" to the economy & actually hit a budget surplus after all

So much for helping the 'just managing'. IFS says Autumn Statement "essentially made no difference". Big hit was Osborne's 12bn welfare cut

IFS: The economy will be 1,250 smaller for every household in Britain by 2020/21 because of the vote to leave the EU

IFS on tweaks to Universal Credit; "This is not how to design and introduce the biggest reform to our welfare system in decades"

IFS lists some abandoned measures: - tougher PIP tests
- selling annuities
- 'pay to stay' for social tenants
- 'shares for rights'

IFS: Insurance Premium Tax "a tax we need to worry about quite a lot" as it "skews the economy away from production involving insurance"

IFS: Yesterday didn't change fact the big losers over this Parliament "are due to be low income families" mainly due to 12bn benefit cuts

Universal Credit so far
- 4 changes to work allowance
- 1 change to childcare support
- 1 change to withdrawal rate

1.55pm GMT

Here are the key points from Paul Johnson's opening statement (pdf) at the IFS autumn statement briefing.

Rather than aiming for Budget balance in 2019-20 Mr Hammond will be happy borrowing 2% of national income, that's about 40 billion, in 2020-21. Remember that at the last election the then Shadow Chancellor, Ed Balls, said he was aiming to balance the current budget by 2018-19, i.e. borrow just to invest. Keeping to that over the parliament would have allowed borrowing of just over 2% of GDP in 2020-21. To misquote Michael Heseltine, it wouldn't be far from the truth to say that the new fiscal plans aren't Osborne's, they are Balls'.

Strikingly [Hammond] responded not at all to calls for more money for either the NHS or social care. I'm going to stick my neck out and suggest he won't be able to do that for much longer.

One of the more expensive measures announced was yet another freeze to fuel duty - the seventh year in a row this has happened. If the policy is never to increase fuel duty again, as seems to be the case, we should just be told rather than being told always that it will rise with inflation next year and then that never happening. This is turning into a really big problem both for the Treasury and for our approach to the taxation of motoring.

Earlier this month the Bank projected growth of 1.4, 1.5 and 1.6% in 2017, 2018 and 2019 respectively. The OBR's projections are for growth of 1.4, 1.7 and 2.1%. That's quite a big difference.

In the face of deteriorating forecasts Mr Hammond neither tightened fiscal policy nor followed his predecessor's example of sticking with previous spending plans. He loosened by an annual 10 billion or so. And he loosened in a rather specific way, mostly by increasing planned capital spending. Given the choice between jam today in the form of more money in people's pockets and jam tomorrow in the form of potential economic returns from greater investment, he went for jam tomorrow.

Mr Hammond wasn't guilty of too many fiscal infelicities yesterday, but the way in which he announced the increase in IPT was certainly one of them. It is half the rate of VAT, he said, as if in explanation of the rise. Well, so it should be - in fact it should be lower. It's only the value of the insurance - premiums net of pay outs - which one should think of as being VATable. That would imply an IPT rate much less than 10%, not more.

We will also wait and see whether this really is the last Autumn Statement. We have been here before after all. Chancellor Kenneth Clarke also moved from a separate Autumn Statement and Spring Budget to a single Autumn Budget. That didn't survive a change of occupancy at number 11.

1.20pm GMT

Here is the full text (pdf) of Paul Johnson's opening presentation at the IFS briefing.

1.19pm GMT

Workers in Britain face the biggest squeeze on their pay for 70 years as a Brexit blow to the economy knocks wage growth and stokes inflation, according to an analysis of the UK's government's latest tax and spending plans.

Picking over Philip Hammond's autumn statement, the Institute for Fiscal Studies said real wages in the UK - pay adjusted for inflation - will still be below their 2008 level in 2021.

1.14pm GMT

Paul Johnson, director of the Institute for Fiscal Studies, has just started the IFS's briefing on the autumn statement.

He says wages in real terms will still be below their 2008 levels in 2021. This is "dreadful", he says.

However, the outlook for living standards has deteriorated rather sharply since March. The OBR is forecasting both lower nominal wage growth as a result of lower productivity, and higher inflation resulting from the exchange rate depreciation. Overall real average earnings are forecast to rise by less than 5% between now and 2021. That means they will be 3.7% lower in 2021 than was projected in March. To put it another way around half of the wage growth projected for the next five years back in March is not now projected to happen. On these projections real wages will, remarkably, still be below their 2008 levels in 2021. One cannot stress enough how dreadful that is - more than a decade without real earnings growth. We have certainly not seen a period remotely like it in the last 70 years.

12.52pm GMT

Only a third of voters think the measures announced in the autumn statement will help the economy, an ICM poll conducted for the Guardian suggests.

ICM carried out its survey online last night and, although respondents were generally positive about the measures in the autumn statement they were asked about, overall they did not seem very convinced that Philip Hammond's policies would do a lot to help the economy.

11.53am GMT

George Osborne made 320,000 in a few weeks from delivering speeches in America, the Press Association reports.

The former chancellor, sacked from the government by Theresa May when she became prime minister in July, has been paid more than 80,000 a go for some of his recent speaking engagements.

The figures, revealed in the latest register of MPs' financial interests, show Osborne expects to receive payments of 81,174 and 60,578 from JP Morgan for two speeches delivered at the start of October - a total of seven hours work.

11.49am GMT

Tony Blair has given a lengthy interview to the New Statesman. Here are some of the top lines.

What I'm doing is to spend more time not in the front line of politics, because I have no intention of going back to the front line of politics, to correct another misunderstanding ... but in trying to create the space for a political debate about where modern Western democracies go and where the progressive forces particularly find their place ... I'm dismayed by the state of Western politics, but also incredibly motivated by it. I think in Britain today, you've got millions of effectively politically homeless people ...

What I'm interested in doing is asking: what are the types of ideas that we should be taking forward? How do we provide a service to people who are in the front line of politics, so that we can provide some thinking and some ideas? The thing that's really tragic about politics today is that the best ideas about politics aren't in politics. I find the ideas are much more interesting in the technology sector, much more interesting ideas about how you change the world.

It can be stopped if the British people decide that, having seen what it means, the pain-gain/cost-benefit analysis doesn't stack up. And that can happen in one of two ways. I'm not saying it will [be stopped], by the way, but it could. I'm just saying: until you see what it means, how do you know?

Either you get maximum access to the single market - in which case you'll end up accepting a significant number of the rules on immigration, on payment into the budget, on the European court's jurisdiction. People may then say, 'Well, hang on, why are we leaving then?' Or alternatively, you'll be out of the single market and the economic pain may be very great, because beyond doubt if you do that you'll have years, maybe a decade, of economic restructuring.

11.14am GMT

The Resolution Foundation thinktank has published its full verdict on the autumn statement. As my colleagues Heather Stewart and Jessica Elgot report, it is saying that the squeeze on living standards over the next five years could be even worse than it was during the financial crash.

Here is there story.

Related: UK living standards squeeze 'will be worse than after global crash'

Families face a worse squeeze on their living standards over the next five years than they suffered in the wake of the financial crisis, as Brexit slows the economy and Conservative welfare cuts bite, according to a new report.

Analysis of Wednesday's autumn statement by the Resolution Foundation thinktank suggests average earnings are set to grow only half as rapidly as in the austerity years after the economic crisis. At the same time, living standards will be undermined by higher inflation and ongoing welfare cuts.

10.46am GMT

John McDonnell, the shadow chancellor, has also been giving interviews this morning. Here are the key points he has been making.

We'd make sure that instead of giving tax giveaways to the wealthy and corporations, and ignoring the issue of tax avoidance and tax evasion, we'd make sure we had a fair taxation system. And in that way we're not talking about increasing taxes or anything like that, what we are saying is that we use our resources more effectively.

We will want to abide by the principles that you spend what you earn.

There are large numbers of people earning above 43,000 who are in jobs like train drivers, like senior teachers and others who have been hit and do need protecting.

If we are going to be doing redistribution we should be hitting those who are over [that level]. For example, our policy is 50p on 150,000, reverting to the original tax system we had some years ago.

No, I would be very disappointed if he did [drop the triple lock]. Under the Labour government Gordon Brown wanted to tackle the issues around child poverty and pensioner poverty and that is what he did. He lifted people out of poverty at both stages of their lives, both children and older people ... If we can grow the economy, and we have a fair taxation system, we can afford it.

We can't do these negotiations without openness and transparency. People need to know where is the government going and how is it going to get there. At least then you stabilise things and people will be able to settle down into serious negotiations and we will get the best deal. Until the government gets to that position, we are going to have these uncertainties and this speculation.

It doesn't look brilliant but that's what they do now and they have to think themselves. The new style in parliament at the moment is people are tweeting all the time. They're doing a running commentary on what's going on. It doesn't look good, but that's what happens.

It's interesting because everybody's got these new handheld devices all the time, they're tweeting all the time, but interestingly enough the general response to the points I was making was received quite well within parliament and outside.

John McDonnell responded to #as16 and Labour MPs looked at their phones. Me for @IndyVoices (Pic via @MailOnline) https://t.co/30axh5uVSp pic.twitter.com/hm1Ec4RxP3

10.05am GMT

Here is a full summary of the main points from Philip Hammond's interviews this morning.

The fact is, it is not about what we want the outcome to be. It's going to be a negotiation. We are going to sit at the table with the representatives of the European Union. And nobody, at this stage, can be certain about what the outcome of that negotiation will be. That is what creates the uncertainty, whether you are a chancellor of the exchequer trying to forecast the public finances for a couple of years down the line or whether you are a businessman making an investment in a production line.

Economic forecasting is not a precise science. And the OBR itself makes the point in its report that there is a very high degree of uncertainty around the report that they issued yesterday because of the circumstances that they are in.

I think we should look at what the report is projecting, we should certainly not ignore that, we should look at it as one of the possible range of outcomes that we need to plan for.

There is a wide range of uncertainty around the forecasts says Hammond. This is true pic.twitter.com/ytPC3FCLoX

To me it makes sense, given the warning signals from the OBR report, to keep a little bit of firepower in the locker, to build a little bit of a reserve so that if there is a slowdown next year, we've got enough capacity to support the economy, to protect jobs, to ensure that the economy can get through any headwinds it encounters.

It's not out of control, it's larger than we would like it to be.

I don't think that's true at all. We are facing very significant fiscal challenges. Within the constraints that that imposes, we've tried to focus what firepower we do have on helping those who are ordinary working families who are hard-pressed to get by.

Stopping the scheduled rise in fuel duty was an important step in that process. Reducing the taper in universal credit so that people in work on low wages are able to keep more of their wages. Recommitting to raising the personal allowance in the income tax system to 12,500 by the end of this parliament despite the fiscal challenges will leave everybody in this country better off.

It is not true that it was not mentioned. If you read the statement, it absolutely was mentioned. As I said yesterday in parliament, it may have been my first autumn statement, but I'm not a complete rookie and I would not have failed to mention the NHS.

If I ever need any advice from Nigel Farage I've got his number and I'll give him a call. Tell him not to hold his breath.

9.46am GMT

Paul Johnson, director of the Institute for Fiscal Studies, will present his full verdict on the autumn statement at 1pm, but he was on the Today programme this morning. He admitted that economic forecasts were "always wrong". But the Office for Budget Responsibility was more optimistic about the impact of Brexit than other bodies, he said.

The broader point is that, yes, of course, forecasts are always wrong, and Robert Chote at the OBR has always been very clear about that, but they are made as the best you can do at the time.

The actual forecasts that we have got from the OBR are in fact considerably more optimistic than those we have from most independent forecasters, and significantly more so than those we have from the Bank of England.

9.03am GMT

Earlier I posted some of the main lines from Philip Hammond's morning interview here, but I've taken them out because there is now a full summary here, at 10.05am.

8.26am GMT

Q: You used to sell cars. How would you feel if you bought a car and it did not do what was promised. Do you owe the country an apology?

Hammond says the government has created jobs and cut the defict by two thirds. When the facts change, the government must respond. He says he set out a responsible package with limited, additional borrowing.

8.24am GMT

Q: So this means people will just have to be prepared for having less money, because inflation will eat it away.

Hammond says if sterling stays at the current level, and if importers pass on their costs, inflation will rise. But we don't know if importers will pass those costs on. This is a work in progress, he says.

8.21am GMT

Q: The Resolution Foundation says people will be worse off in this parliament than in the last, because of rising inflation.

Hammond says the OBR forecast suggests inflation will rise to 2.5% next year. That is higher than we have been used to, but not high by historical standards. And sterling has down, making imports more expensive.

8.19am GMT

Q: Isn't the government contributing to this? The OBR asked about the government's Brexit plans and was given two paragraphs from a Theresa May speech saying nothing.

Hammond says the government wants the best possible access to the single market. But it will be a negotiation. No one can be certain what the outcome will be, he says.

8.17am GMT

Q: Are you saying you don't believe the OBR forecasts? The Telegraph says you take these forecasts with a pinch of salt.

Hammond says forecasting is not a precise science. The OBR itself says there is a large degree of uncertainty. The government should not ignore these forecasts. It should include them in the range of possibilities for which it plans. It should not ignore the strengths of the economy. And it is right to keep something aside.

8.14am GMT

Q: This is higher debt than after the oil crisis or the banking crisis. Some people say this is not just an economic failure, but a moral failure. That is what the Tory manifesto said in 2015.

Hammond says the government has controlled public spending. It has generated nearly 2.8m new jobs. And the OBR says another 500,000 new jobs will be created this parliament.

8.12am GMT

Nick Robinson is interviewing Philip Hammond.

Q: Is it time to apologise for saying you would tackle the deficit when you haven't?

8.10am GMT

As usual, the morning after the autumn statement, the chancellor and his Labour opposite number are doing a round of interviews. Philip Hammond will be on the Today programme shortly, and I will be covering his interview in full.

Yesterday Hammond told MPs that the Office for Budget Responsibility thinks Brexit will cost the country 59bn over the next five years. Tory Brexiteers have dismissed this analysis, and Iain Duncan Smith, the former work and pensions secretary, said this was "another utter doom and gloom scenario". But last night David Gauke, the chief secretary to the Treasury, defended the OBR. He told Newsnight:

We have an independent body that makes the forecasts and it is sensible for a government to work on the basis that that independent body has got it right.

Related: Brexit will blow 59bn hole in public finances, admits Hammond