Chamber and committees

Paul Johnson said that the decisions taken by the chancellor were

“almost entirely a set of policy choices unrelated to the pandemic.”

He went on:

“High inflation, rising taxes, and poor growth, still undermined more by Brexit than by the pandemic, will see real living standards barely rising and, for many, falling over the next year.”

Is that something that we are seeing elsewhere, or is the UK unique in being in this situation? If the UK is not unique and other countries are battling the same issues as the UK—Brexit excluded—and doing just as badly, we cannot criticise the UK Government. Is the UK doing specifically poorly on these issues?

The issue of productivity is crucial because the sectors in which more and more people are needed, such as social care, are the ones where it is hardest to deliver the productivity gains that are require.

A shortage of skilled labour for the high-tech and more productive jobs that we need to keep the economy going and create the additional resources that we want to invest in health and social care and so on will force up wages in the short, medium and long terms. How will that impact on our international competitiveness as a global trading economy?

I will stick with inflation. No one has answered the question about CPI versus the Treasury deflator yet. I was struck by the difference between the OBR’s assumed nominal earnings growth in 2022 of around 3.9 per cent and the 1.3 per cent that is in the Bank of England’s monetary report. That is a huge differential. Most people would probably think that the OBR is nearer the mark on that. From your perspective, do you think that the Bank of England will look again at that, and will there be implications for interest rates? We know that the bank voted seven to two against changing the interest rate last month. What is your feeling about that, and how will it impact on your forecasts?

Is it not the case that, if people are incentivised to invest in assets, they are less likely to invest in the productive elements of the economy that are high risk, which impacts on productivity and growth?

Inflation is leading to fiscal drag, which is a windfall for the chancellor. What is the impact on middle-income earners in particular?

I have one more question before I open it out to colleagues. In his speech, Paul Johnson said that, over the period since 2010,

“health spending will have increased by over 40%, education spending by less than 3%.”

That relates to south of the border, and implies a remarkable lack of priority afforded to the education system, with

“spending per student in FE and sixth form colleges”

remaining

“well below 2010 levels.”

He goes on to say:

“This is not a set of priorities which looks consistent with a long term growth strategy.”

What has been the impact on growth of those education policies over the past decade or so?

For our second budget scrutiny evidence-taking session, we are joined remotely by Carl Emmerson, the deputy director of the Institute for Fiscal Studies. Mr Emmerson is standing in for the director of the IFS, Paul Johnson, who is unwell—we wish him a swift recovery. I thank Mr Emmerson for making himself available to give evidence at short notice and welcome him to the meeting.

I remind members that our broadcasting team will operate their microphones, so they should not touch them. We have an hour for this evidence-taking session, so it would be helpful if members could keep their questions concise.

I invite Mr Emmerson to make a short opening statement.

Thank you. We allowed 60 minutes for this session, and we have taken just 15 seconds more than that. I thank Mr Emmerson for his short, sharp, direct and stimulating answers to our questions.

No matter whether we move away from or keep focusing on the numbers, the IFS has still talked a lot about fairness, stagnating incomes and lack of growth and productivity. What could or should the chancellor have done differently in October, and what lessons are there for Scotland, given that our budget process begins on Thursday?

What about Scotland? What kind of lessons can we learn for our budget from what the UK has done? We have had six weeks to reflect on what has happened, and the Scottish ministers will be setting out their proposals from Thursday. What pitfalls should they avoid and what kinds of things can they do in a positive sense, given the policy restrictions, of course?