Spending review is not the end of austerity, warns IFS - as it happened
All the day's economic and financial news, as the Institute for Fiscal Studies gives its verdict to George Osborne's spending review.
6.26pm GMT
And finally, here's our own Larry Elliott's take on today's IFS report:
Napoleon would have approved of George Osborne. "I know he's a good general", the French emperor once said. "But is he lucky?"
The answer to that question, according to the Institute for Fiscal Studies, is yes. The chancellor got lucky when the Office for Budget Responsibility raised its forecasts for tax revenue and cut its predictions for interest payments on the national debt. That gave Osborne some much-needed wiggle room to delay welfare cuts, choke back on austerity and spend a bit more on infrastructure.
Related: If Osborne misses his new target, there really is nothing left to cut
4.48pm GMT
The Office for Budget Responsibility has been attracting flak for its more optimistic fiscal forecasts.
Some economists are concerned that the new projections - which gave the chancellor a welcome windfall which he rapidly spent - may be unrealistic.
Some thought the OBR was too optimistic on revenues.
Andrew Goodwin of Oxford Economics said the fiscal watchdog "provided the chancellor with an unexpected free pass" on the public finances. He said the OBR had a history of optimism on tax revenues and "today's forecast revisions move them even further towards the optimistic end of this scale".
3.00pm GMT
And that's the end of the Institute for Fiscal Studies briefing.
IFS head Johnson wraps up by stressing the news on universal credit effects is not new since yesterday. it is based on what we knew on uc b4
2.55pm GMT
Q: Will there be a two-tier benefit system as people are moved onto Universal Credit?
Andrew Hood agrees that any system that introduces cuts for new claimants but protects existing ones creates a two-tier system.
2.41pm GMT
2.40pm GMT
Sky's Ed Conway sums it up:
IFS broad message: yday makes life less painful for welfare recipients in short run but slightly worse in long run pic.twitter.com/L7Rs9JT6ls
2.38pm GMT
Q: Is George Osborne right to spend the 'windfall' from the OBR's improved fiscal forecasts?
Gemma Tetlow agrees that the chancellor's response is a little 'asymmetric' (as the chancellor could have banked the money and gunned for a more rapid fiscal consolidation).
It doesn't seem to me to be not wise to not implement massive spending cuts if you think you might not have to.
2.34pm GMT
Q: Is Iain Duncan Smith right when he says today that under the new Universal Credit system, people are moving into work faster and earning more than under the current?
Paul Johnson declines to comment on the behaviour of the very small number of people already on UC; the IFS's work relates to the distributional impact when it is fully implemented.
2.31pm GMT
Onto questions.
He says that the government overestimated the savings from the tax credit cuts, which is why the u-turn only yields 3.4bn not the 4.4bn expected.
2.27pm GMT
The IFS has also crunched some numbers, showing how the universal credit system will change the benefit system:
2.24pm GMT
The IFS's Andrew Hood is now hammering home the point that the benefit system will still be much less generous in the long term.
He says:
In the long run, the system will be much less generous to low income households. That's the big headline...because other cuts are going ahead
IFS notes little change since yesterday's autumn statement in working age benefits picture pic.twitter.com/C0MtWBuFUJ
2.11pm GMT
Abandoning the planned cuts to tax credits will cost 3.4bn in the 2016-17 financial year, Andrew Hood explains - not the 4.4bn expected.
2.07pm GMT
Andrew Hood of the IFS is now running through the latest welfare changes.
The big picture is that:
2.05pm GMT
Giving councils full retention of business rates is 'genuinely revolutionary', David Phillips adds, and part of the government's devolution of powers:
2.04pm GMT
1.58pm GMT
The IFS is also concerned about Osborne's plan to allow local councils to raise an extra 2% from residents, to fund social care in their area.
The problem is that councils who already charge the highest bills can obviously raise more cash than an area with lower charges.
1.52pm GMT
The iFS is now outlining the huge funding cuts which local government's now face.
Local government Departmental Expenditure Limit to be cut by 56% by 2019-20: https://t.co/wh4RWt64uY
Level of cuts to local government is incredible (and politically cynical: voters will blame councils) https://t.co/wYGpQSiXHf
1.48pm GMT
Reminder, you can watch the IFS briefing online here.
1.47pm GMT
Here's Katie Allen's news story on the Institute for Fiscal Studies new report:
Related: Autumn statement: IFS warns on tax rises and spending cuts
1.46pm GMT
It won't have escaped anyone's notice that George Osborne blew through his welfare cap yesterday, Gemma Tetlow deadpans.
She reminds us that the OBR expects the government to breach the cap three years running.
one piece of bad news for Osborne yesterday was that fcast for spending on disability benefit went up, IFS says
1.43pm GMT
George Osborne has slightly eased the pace of fiscal consolidation, Tetlow explains.
As this chart shows, the UK is on track to reach the same point, but more slowly.
1.40pm GMT
IFS - areas seeing largest cuts, incl:Transport, local govt dept expenditure limit.At other end of scale cabinet office sees real increases
1.39pm GMT
The only non-protected department to avoid the squeeze this time is defence, Gemma Tetlow adds - last time it took a big cut, this time its seen its budget rise (to address new security concerns)
1.38pm GMT
Despite the lower spending cuts, it won't be an easy ride of the next few years, Tetlow continues.
And this chart shows where the axe has fallen hardest - including Transport, and the Department for Business, Innovation and Skills.
Unprotected Departmental Expenditure Limits falling 18% by 2019-20. Gemma Tetlow: https://t.co/uA0GuvbfHE pic.twitter.com/UnkMtkXbZH
1.37pm GMT
Osborne's new stamp duty levy on new second homes and buy-to-let properties will he hard to implement, Gemma Tetlow suggests.
Someone could, for example, buy a house, live in it for a bit [thus avoiding the levy], and then rent it out.
1.34pm GMT
IFS says apprenticeship levy is "simply a tax on employment and earnings in large firms" could encourage training, might not
1.33pm GMT
The Apprenticeship levy (which has annoyed businesses) is better than the plan originally proposed by the government, Tetlow says:
It will only affect the largest 2% of companies - and is a tax on the earnings of large firms (they get vouchers, which can then be redeemed if they actually train some workers).
Related: Fury over Osborne's 11.6bn business 'payroll tax'
1.29pm GMT
Gemma Tetlow of the IFS is explaining how Osborne benefitted from various positive forecasting changes.
The overall effect was to strengthen the public finances by around 4bn in the medium term.
1.26pm GMT
Osborne's inflexible fiscal target (surplus in 2019-20) may mean revisiting spending/raising taxes/abandoning target https://t.co/O88mQYsjGf
1.26pm GMT
There are 'big distributional effects' from the cuts in funding from central government to local government, Johnson says.
Changes to the business rate system, allowing local authorities to retain growth in revenue, is a "genuinely big change".
1.23pm GMT
Paul Johnson is adamant that the chancellor isn't suddenly being more generous to the poor:
"The long term generosity of the welfare system will be cut just as much as was ever intended"
1.22pm GMT
On the tax credits u-turn, Paul Johnson says there is no net change in the long run - because Universal Credit is already legislated to replace current benefits.
He confirms that 2.6m families will be worse off under UC, losing around 1,600 each.
IFS: estimate in steady state univ credit will now involve 2.6m working families being an average of 1,600 a year worse off 1/2
IFS cont: than they would have been under the current system while 1.9 million will be 1,400 a year better off 2/2
1.19pm GMT
Johnson warns that housing associations are facing particularly deep cuts to their grants, around 40% in 2017.
1.17pm GMT
Johnson opening remarks: This is not the end of "austerity" but the cuts will be less severe than implied in July: https://t.co/O88mQYsjGf
1.17pm GMT
George Osborne has set himself an inflexible target, to achieve a surplus this parliament, Paul Johnson continues.
And there's only a 50:50 chance that he'll achieve it.
1.12pm GMT
Paul Johnson, head of the IFS is introducing its analysis now (here's the livefeed)
He says that the government is now aiming to cut spending at non-protected departments by around 18%, compared to around 27% previously.
Contrary to some headlines this morning, this is absolutely not the end of austerity....
This spending review is still one of the tightest on record. Maybe not as bad as 2010, but that's a pretty high bar.
Thursday's Telegraph front page: The end of austerity #tomorrowspaperstoday #bbcpapers #spendingreview pic.twitter.com/NABVUsf0Fi
1.07pm GMT
The IFS is also warning that - despite scrapping tax credits cuts - George Osborne's plan still means reducing non-pension benefits to their lowest level as a share of national income for 30 years.
1.05pm GMT
Here's the first newsline from the IFS, via the Press Association:
Around 2.6 million working families will be an average 1,600 a year worse off as a result of benefit changes confirmed in Chancellor George Osborne's Spending Review, the Institute for Fiscal Studies has found.
1.03pm GMT
IFS Spending Review briefing will begin in a few minutes - livestream: https://t.co/gu9AQVXkKY pic.twitter.com/J9AMOrsHBf
1.02pm GMT
The Institute for Fiscal Studies is releasing its analysis of the Spending Review now, at Senate House in London.
12.54pm GMT
Apparently they let the chancellor loose on an actual new house....
Chancellor welcomes news @PersimmonHomes to build 80,000 homes & create 1,000 jobs by 2020 https://t.co/TjoLOG0v9V pic.twitter.com/Kila4eioFs
12.18pm GMT
The Institute for Fiscal Studies gives its verdict on the Autumn Statement in around 40 minutes time - it will be live-streamed here.
LIVE FEED of our post- #SR2015 & Autumn Statement analysis from 1pm today: https://t.co/gu9AQVXkKY
12.09pm GMT
Some of today's newspapers claim that Osborne unveiled 'the end of austerity'. The Daily Mail sounds positively cross about it (like most things.....):
Thursday's Daily Mail front page: Whatever happened to austerity? #tomorrowspaperstoday #bbcpapers #spendingreview pic.twitter.com/Z0NTSDEjJu
Spending Review not the end of the austerity - Paul Johnson @TheIFS
11.52am GMT
German bank Berenberg is predicting that George Osborne will not achieve the cuts outlined yesterday.
Their economist, Kallum Pickering, says:
George Osborne has set a precedent in the last five years that he won't break over the next five years. He makes promises for cuts that he never quite gets around to. This is good news for the economy today, but a risk for tomorrow.
In our view, the plan to bring the deficit down by reductions in day to day spending is not feasible. This year, total government spending will be a little over 40% of GDP. The Government is targeting to reduce this total to around 35% of GDP by 2020. This will be the lowest level since 2000 and even below the Thatcher years...
11.23am GMT
We may need George Osborne's brick-laying skills -- his plan to build 400,000 new homes could founder if enough trained builders can't be found.
"The chancellor has openly admitted that more affordable housing, including the private sector, needs to come forward to allow people to become owner occupiers and achieve their aspirations. However, it will take at least five years and, until those homes are built, young families have no choice but to rent.
"The problem is that until these new homes are built, private rented property is price inelastic. Landlords need to protect their investment and are expected to pass the cost on in the form of higher rent. This reduces a tenant's ability to save a deposit for a home of their own, and in turn their ability to make best use of the range of the Help-to-Buy initiatives."
Buy-to-let surcharge will "hurt tenants, not landlords" https://t.co/fsxKm9MiOw via @CityAM
11.04am GMT
There's something slightly clichi(C)d and unconvincing about politicians tromping around building sites....
10.58am GMT
George Osborne has already warned that he won't shy away from "difficult decisions".
The chancellor has spent this morning defending criticism of his autumn statement -- and claims that he's abandoned austerity by committing to spend his 27bn fiscal windfall.
Related: Osborne: I will continue to take 'difficult decisions' after tax credits U-turn
Asked by the Today presenter Nick Robinson whether he was admitting he had made a mistake and was apologising or whether he had simply been forced to change tack by critics, the chancellor said that his "central judgment" to move to a lower welfare and higher wage economy was the right one.
10.48am GMT
Torsten Bell, the Resolution Foundation's director, is adamant that George Osborne's spending review decisions hit the poor but spare the rich.
That's because long-term welfare changes are still in force -- so as Universal Credit is rolled out, millions more people will be hit.
The most damaging changes are to universal credit, the government's flagship welfare programme which is at serious risk of being undermined. For working households with children on universal credit the average loss with be 1,300 in 2020.
These changes will also increase the risk of people being trapped in low-paid short-hours work.
Those hit hardest by the new universal credit rules will be lone parents, disabled people and couples with children who rent their home rather than have a mortgage.
Currently, the rules allow lone parents 8,800 a year in earnings before their universal credit starts to get reduced. From April that figure will drop to 4,800.
Related: So, Osborne scrapped tax credit cuts - but what of universal credit?
10.28am GMT
The Resolution Foundation are continuing to kick the tires of the autumn statements.
The think tank is warning that George Osborne has slipped out significant tax rises, on top of the surprise 27bn pick-up in the public finances from the independent Office for Budget Responsibility.
Matthew Whittaker @resfoundation: Osborne's tax rises amount to 27bn, on top of the 27bn windfall from @OBR_UK forecasts.
Matthew Whittaker @resfoundation: no change in loss for working families by 2020 as UC kicks in: 650 average for poorest 50% of households.
Willetts @resfoundation: In old days, politicians promised milk + honey before election and you'd get bad news after; Osborne did opposite.
David Laws @resfoundation: Osborne has fudged how much he's U-turned by focusing on 2019-20 instead of near-term.
'He's spending a lot of time + money + capital shooting other people's foxes, rather than developing a strategy': David Laws @resfoundation
9.55am GMT
Katie Martin of the Financial Times has a good take on this morning's Barclays fine.
Deals over 20 million were commonly referred to within Barclays as "elephant deals" because of their size and the Transaction, which was for an amount of 1.88 billion, was also referred to as an "elephant deal".
Barclays and the troublesome 'elephant deal' https://t.co/fUwBNT2rpy
9.45am GMT
French bank BNP Paribas also expects the ECB to cut its deposit rate (paid by banks on their ECB deposits) deeper into negative territory.
Currently, it is minus 0.2% - and BNPP thinks it will be slashed to -0.4% next Thursday.
BNP Paribas now expects a 20bps cut to ECB deposit rate in Dec Vs prev forecast of 10bps pic.twitter.com/NdzhpcpplV
9.35am GMT
Barclays' shares are actually up this morning, gaining 3p to 224p, despite the bank being shamed for cutting corners on financial crime checks.
Barclays shareholders clearly spooked by these fines. Shares up only 1.3%. $BARC
Barclays didn't want to "irritate" big-spending clients by asking too much about where their billions were coming from, FCA says. Cracking
Barclays' management have agreed to settle the fine from their bonuses, right?... https://t.co/v6XIm8Z0DU
9.22am GMT
Is there no end to the misdeeds of Britain's banks?
Barclays went to unacceptable lengths to accommodate the clients.
FCA fines #Barclays 72m for failing to make proper checks on mega-rich clients because 'it did not wish to inconvenience' them
9.13am GMT
Kit Juckes, top currency strategist at Societe Generale, says we should expect something pretty serious from the ECB at next Thursday's meeting.
Dipping into classical texts, Kit writes:
"He who exercises no forethought but makes light of his opponents is sure to be captured by them".
The quote's from Sun Tzu's The Art of War and while I don't think for a second that Mario Draghi is anyone's opponent, he is regularly under-estimated.
It's not really obvious that such a policy would drive rates (and in particular, longer-dated rates) any lower, but it reinforces the sense that Mr Draghi is committed to further easing next month.
9.05am GMT
Mario Draghi hinted strongly in October that he could take more action if needed, to get the eurozone away from deflation.
So, he risks a backlash if the ECB isn't decisive next week.
"It cannot run the risk of disappointing markets, having raised expectations of action."
8.48am GMT
The euro is weakening this morning, as speculation grows that the European Central Bank will announce significant stimulus measures next week.
The single currency has slipped to just $1.06 this morning, near a seven-month low.
Forecasters are cutting their year-end and first-quarter euro estimates at the fastest pace since March, when the start of the central bank's bond-buying program sent the currency tumbling to a 12-year low. Options signal there's a 70 percent chance the euro will match that low this year, up from 18 percent when the ECB last met in October.
"He's going to pull a rabbit out of the hat -- we're just not sure what that rabbit will be.
"The euro is going down heavily."
#Draghi will pull a rabbit of the hat, say euro watchers, but none knows what it'll be https://t.co/vaS9197ys2 #ecb pic.twitter.com/YD12xBYOzH
8.37am GMT
The Resolution Foundation, a UK think tank, has warned that poor British families are still losing out, despite the tax credit reprieve announced in yesterday's sutumn statement.
And that's because of longer-term changes to the UK welfare system, which will bring in the universal credit.
The attention now turns to the longer term changes to the welfare system the Government has put in train. All the post-2020 welfare cuts announced in the Summer Budget remain in place and will eventually affect millions of families as Universal Credit is rolled out nationally.
"New Resolution Foundation analysis shows that these cuts fall overwhelmingly on poor working families.
Low-income working families on Universal Credit set to lose 1,300 https://t.co/n6igG9roK3 pic.twitter.com/2PqxDcv2tl
RF's distributional analysis just out suggests average loss for bottom half is 650 from all changes from Budget + SR, no loss in top half
8.34am GMT
George Osborne has been conducting a whistle-stop media tour this morning - and sporting a distractingly high-vis jacket - to discuss yesterday's spending review.
There's a lot of attention on his surprise tax credit u-turn - a sign of weakness, chancellor?
"I don't think it's a weakness, if you are doing this job, to listen to people and listen to the concerns that are made."
Spending Review Reaction, @George_Osborne talks to @GMB, #GMB pic.twitter.com/v67Eg2itte
8.27am GMT
Good morning, and welcome to our rolling coverage of the financial markets, the economy, the eurozone and business.
Coming up today, we'll be mopping up economic reaction to Wednesday's Autumn Statement and Spending Review.
Related: OBR admits uncertainty over 27bn windfall behind tax credit U-turn
It's a #spendingreview #tomorrowspaperstoday montage: https://t.co/eMlZoF01X9 pic.twitter.com/fehi2OKqpU
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