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Are we stupid?

As we sit in the midst of what seems like an historic episode I find myself struck by one question: how can we have let ourselves get into this again?

Didn’t we know this might happen?

For sale signsAt least we should have seen a turn in the housing market coming, surely? It’s not just in the UK that we have had several years of warnings of house price corrections, comparisons to the 1980s, graphs showing scary upward trajectories.

Yet some of the world’s best paid people lent money secured against inflated house prices, and appear to be surprised that the market is not what it was.

There’s a Homer Simpson quality to the analysis that led us here…you can picture Homer attempting to grab a donut well out of his reach, banging his head, and then repeating the mistake time after time. That’s where we appear to be in the housing market.

One colleague suggested to me today – rather acutely - that housing market cycles last eleven years, while our memories last nine. There is always a two year silly frenzy that has to be undone.

The idea is not very different to that expressed by Alan Greenspan in Monday’s Financial Times. He bemoaned the obvious failure of the commonly used risk-management and econometric models to cope with the episode we are now in.

They do not fully capture “the innate human responses that result in swings between euphoria and fear that repeat themselves generation after generation with little evidence of a learning curve” he wrote.

It’s probably the only point on which Alan Greenspan and John Kenneth Galbraith would agree.

Interestingly, human irrationality is a hot topic in economics at the moment. Behavioural economics it’s called, on the cusp of economics and psychology.

While it is dismissed by some old-school economists as a bit flaky, and by others as intellectually lazy, it is a subject that is hard to dismiss entirely, particularly as we look at the repeated cycles of boom and bust.

Put simply, behavioural economics argues that human beings’ decision-taking is guided by the evolutionary baggage which we bring with us to the present day.

Evolution has made us rational to a point, but not perfectly so. It has given us emotions, for example, which programme us to override our rational brain and act more instinctively.

Those emotions probably worked well for us in the savannah, where it wasn’t really very useful to spend time thinking about whether to flee the tiger or not. But the instinct is still with us now, it affects our behaviour, even that of apparently very rational people, and it can’t be ignored.

Emotions are just one example of behavioural effects. The general point is in explaining our behaviour, evolution can trump economic theory.

Two current books make the case for taking behavioural economics seriously rather well.

The first is Dan Ariely’s Predictably Irrational which details the many experiments that have been performed on people to demonstrate systematic behavioural traits.

The second – released soon – is Basic Instincts, by Peter Lunn. It is an excellent book; a feistier defence of behavioural economics and more of an attack on traditional economics.

Personally, I don’t see old economics and behavioural economics as opposed. It is useful to assume people are rational as a good approximation to their long term behaviour, but it would be unwise not to think how in practice their behaviour may deviate from that simplifying assumption.

Both books are well worth reading.

You will read about fascinating lab tests on people, demonstrating the ways in which honest people allow themselves to be dishonest, about how sexual arousal affects judgement and how we tend to work less hard if we are paid by results, than if we are doing something as a favour for someone.

And talking to Dan Ariely in recent days, I find he comes up with at least two ways in which the literature is relevant to where we are now.

First is the insight that emotion (greed, fear) can override rationality when we make decisions (we repeatedly tend to buy too much food if we visit the supermarket when we are hungry).

And secondly is a tendency to see evidence selectively. We give more weight to the facts that support the theory we have in mind.

So in the upswing, it is easy to find facts to support the upswing…other evidence is overlooked. Only when the countervailing evidence becomes unarguable, do we change our mindset and start fearing the uncertain.

The literature does not imply we’re stupid. We’re just not as clever as we like to think.

It is a good point to bow out on, as this column represents the last post for the Evanomics blog for the time being.

I stop being Economics Editor this week, as the excellent Stephanie Flanders takes over. (I’m not sure if it be called Stephanomics, but her blog will be worth reading whatever the name.)

I will strive to do some writing, but my new day job (or night time job to be more accurate) will be presenting the Today programme on Radio 4 (for a year at least).

It’ll be a fascinating test, to see whether the mind-set of an economist can contribute to discussions on subjects as diverse as Pakistan and frog spawn.

Thank you for reading Evanomics, and to the News blogs team for ensuring that some of the most egregious errors are dealt with.

Recent entries


Taboo of nationalisation

Is it a good time to nationalise the banks?

The taboo of nationalising a bank – evident in the government’s reluctance to accept that option for Northern Rock – may have to be overcome in the next few years.

This is one lesson to draw from previous banking crises. The Swedish banking crisis for example, is generally regarded as well handled. And the solution there was to take ownership of the failing banks, to strip out the bad assets and to put them into separate well-funded asset management companies whose only job was to extract as much value from them as possible.

Once that had been done, new “cleaned up” banks could be re-established and operate again very quickly. It worked for them, although it was helped by buoyant economic conditions.

But it tells us that a successful resolution of a bank crisis can involve governments or central banks owning more of their banking systems than they would probably like.

The relevance of this argument today is that the banking crisis we are now in is one in which the banks’ own capital has been eroded by losses they have incurred on their past decisions.

The banks' capital is best viewed as a relatively small rock, on which the rest of their activities sit. Before they can borrow and lend £12, they need £1 of their own capital to serve as a kind of safety cushion. That capital is one thing that makes it safer to lend your money to a bank, than it is for you to lend directly to the bank’s borrowers.

It is no wonder that bank capital is regulated. When borrowing and lending is profitable, it is tempting for banks to scale up their operations and to borrow and lend too much in relation to their capital, in effect reducing the effectiveness of the potential capital cushion.

The problem for all of us is that when bank capital is eroded, the banks’ lending has to be curtailed, with broad economic consequences. Whatever the central bank rate of interest, or whatever the credit-worthiness of potential borrowers, banks are constrained from lending and sometimes have to call in loans that have already been made.

We want banks to lend responsibly, but we don’t want them to curtail lending too far.

So the goal has to somehow be to get more capital into the banks.

That’s not about us putting deposits into banks, or central banks lending money to banks… it is about extra money finding its way into the banks, to rebuild the capital rock on which successful banking depends.

Who can invest new money in banking right now?

The most obvious candidates around the world are the sovereign wealth funds sitting on large amounts of spare cash.

But in the absence of clear information about how much the banks are worth, the funds may be reluctant to throw more money in.

(The experience of CITIC Securities may put other investors off. As China’s biggest brokerage firm, it promised last October to invest $1bn in Bear Stearns in return for 6% of the company, a price that looks high given the news that has occurred since.)

If wealthy foreigners are not going to inject capital into the banks, and if the crisis is as bad as some suggest, the best candidate to inject capital might instead be our own governments.

It’s not quite bailing the banks out, and it would not be aimed at rescuing the shareholders – the new money would go in, and in return the state would obviously have to take a stake in the banks future profits. The existing shareholders would lose some of their share.

These kinds of solutions are not infrequently adopted, but normally occur when the banks have run out of money. But does it have to be a 100% stake in a bank? And does it have to wait until the bank is in dire trouble?

Ultimately the solution to the problems of the banks is clear: the full scale of losses incurred in the bad lending of recent years has to be recognised; the failing assets written off without a fire sale of assets; and for the banks to be recapitalised and re-launched from a healthy base.

Taxpayers might object to their money being sent in to support banks, but it is probably money well spent if it supports the economy generally, and stops the rot quickly.

In fact, there is one final lesson to be drawn from history, from the Japanese banking crisis, which was less well-handled than Sweden’s.

As problems unfurled in the early 90s, the public objected to the idea of helping banks and only one trillion yen of support was mobilised. By the end of the decade, as the crisis worsened, more like 6o trillion had to be found.

These things can get very out of hand.


Chancing it

The slogan for the Budget - you mustn't grumble, it's not too bad.

Sure, the next year or two is not what we thought it'd be, but it's not all permanent damage to the economy we're facing.

In other words, while he is not dismissing the current problems as a mere blip, the chancellor is at least arguing that some of it is simply a temporary disturbance to normal service.

So, on the economy, the chancellor concedes that some growth in the next two years will be lost - and it won't come back later (which is in itself a major concession. His predecessor always assumed that any growth lost returned later).

But at least by 2010, the economy will be growing again at its normal rate. And there'll be no recession in the meantime.

The same pattern occurs on government borrowing. After several years of painfully slowly trying to bring it down, the chancellor is now actually predicting and allowing for more borrowing next year. Overall, the finances are £5-8bn a year worse than he'd expected last year.

But again, you mustn't grumble. The public finances improve with time, and there's only a modest new overall tax rise to help recoup some of the revenue lost during the slowdown.

Fair enough. But behind this scenario though, people might still find things to grumble about.

By 2010, on Mr Darling's forecasts, the economy is a little smaller than the Treasury had been expecting; prices are a little higher and while public spending will be the same, it won't go so far, in that world of higher prices.

And then above all, what if the next few years are far worse than the chancellor has allowed? With so much going on outside the UK, you really can't rule that out.

That may lead to full scale moaning.

The chancellor though, is chancing it - at least , until the next election.


Shrinking economy

I was wrong an hour ago, to say the Golden Rule measure of borrowing was looking better than it had been in 2012. Sorry, bit rushed.

Looking at the data, the chancellor is conceding that by 2011, the economy will be 0.5% smaller than he had thought. And he doesn't appear to be thinking that "lost growth" will magically re-appear later.

That is a real concession. It’s says the slowdown is not all a blip.

This all means the Treasury have "lost" revenue and has extra costs, amounting to a five to eight billion a year deterioration in the public finances for each of the next few years. Of that, about 1.9 billion is being raised in new tax rises

But fortunately for the chancellor, the finances would be even worse than they are, but for the fact that inflation is higher than it was meant to be when he last spoke to us. Higher prices bring tax revenues in.

Perhaps the clearest way to see this story, is to look at the changing Treasury view of the year 2010. Compared to the picture in the Pre-Budget Report, the economy is half a per cent smaller, prices are 0.75% higher and the finances are 6.5 billion worse than expected, but taxes go up 2 billion to recoup some of the money lost.

Public spending is the same as before, but with prices higher, that will make the public spending settlement tougher to deliver than it was going to be.


As expected

The Budget has the shape I expected… a downgrade of the near term, and a bounce back in the medium term. By 2012, the golden rule measure of borrowing actually looks better than it did back in October. I suspect that means it is a net tax raising budget, with the tax rises delayed.

We've already had one tax rise from 2010 - the return of a new fuel tax escalator, with the half pence per litre rise in tax each year, over inflation. The MPs barely seemed to notice it, but it is a tax rise that the next government will find itself dealing with.


Real change of direction

Alistair Darling adopted the technique beloved of his predecessor of rattling through the borrowing figures. But the news this year was good - it seems lower than it was expected to be. The bumper tax receipts that the government received in January seem to have helped.

But the more significant thing is that borrowing is expected to rise in the chancellor's new forecasts. That marks a real change of direction. In the past few years, Gordon Brown always budgeted for borrowing to fall. Of course, his forecasts were often wrong but he always budgeted for borrowing to come down.

Mr Darling does think that by 2012 borrowing will be right back to where he thought it would be.


Not so cautious

The economic forecast is more realistic than it was, having been downgraded this year and next. For 2008 1.75 to 2.25, for 2009 2.25 to 2.75 and for 2010, 2.5 to 3.0. The current consensus among outside forecasters is for growth of 1.7% this year, and 2.0% next.

The chancellor focuses on the bottom range of his forecasts and calls this "cautious", but in reality, the risks are mostly on the downside next year, and those risks could be quite significant. Mr Darling's forecasts appear reasonable, but not very cautious.


Central banks get together

The world's central banks are back. They're taking collective action again - all for one and one for all.

They learned back in December that co-ordinated action works better than individual action.

In any case, moving together at least prevents the stigma facing any one of them that takes individual action, which inevitably invites the question "What do they know? Things must be very bad on their patch."

But why have they all moved now?

Well, it is partly because the action they took back in September is expiring so it needed to be renewed.

But it is partly because the problems they "solved" back then have crept back. The LIBOR spreads - the best measure of the banks' reluctance to lend to each other - have been rising again (though they're not as high as they were last year).

At the same time, there has been a stream of bad news - rising delinquency rates in the US mortgage market, (and not just in sub-prime) worries about hedge funds, about an affiliate of the Carlyle Group, about Bear Stearns, and about a worsening economic situation... which all mean confidence is in short supply. The central banks are doing what they can to re-instil it.

What the central banks are doing is lending money to banks. These are secured loans - but they are secured against assets the borrowing banks possess. Unfortunately the assets are often the very ones other banks are themselves a bit wary of lending against (like mortgage-backed securities).

I'm not questioning the merits of lending against dodgy assets, although others might.

But it is worth questioning whether long term, the central bank action to lend money (albeit against assets that would otherwise be moribund) will work any better second time around than when it was tried last December.

Maybe, but maybe not. Here's the argument as I see it.

The evidence is that the credit crunch has been in two distinct phases - the first was a liquidity crisis, when banks needed cash to help them absorb their off-balance sheet affiliates which found they couldn't re-finance themselves as easily as they needed.

The central banks can provide liquidity - that's what they are designed for.

But that phase has passed. Since late October, we have been in a second phase of the credit crunch which has seen a reluctance for banks to lend to each other not out of liquidity shortages, but out of a general worry that the banks they lend to won't be able to pay them back.

It is, in other words, a crisis of confidence in bank solvency. It's not that banks don't have cash to lend; it's that they don't trust each other to have sufficient assets.

The problem with the central banks’ operations back in December and now, is that they don't really affect bank solvency, so don't have much effect on the underlying solvency worries.

To be more solvent, the banks don't need to borrow extra cash from the central banks, they need extra long-term capital from investors (from say, rich oil states, sovereign wealth funds, or the UK taxpayer).

Lending money doesn't affect the solvency at all, unless it props up confidence that would otherwise be lacking, or unless it injects an implicit subsidy to the borrower or unless it props up the value of some of the assets which the banks hold.

But the measures taken today are not designed to subsidise banks, or prop up the value of assets.

So the "active ingredient" the central banks themselves place emphasis on is the injection of confidence.

That may have a useful short-term effect.

It may stop confidence problems getting out of hand, with fears becoming self-fulfilling.

But long term, confidence will only have a sustainable effect on the solvency of our banks, if the confidence ultimately seems justified.


Flat market

Have we overdone it with city centre flats?

Or apartments as they are often called in the sales literature.

Arrive at almost any railway station - from Norwich to Nottingham - and you can't help but be struck by how many new blocks have appeared.

But there's some evidence the flats are not selling.

The tallest residential block in Britain is Beetham Tower, the iconic Manchester building that opened less than two years ago. Some colleagues of mine have found fifty of the flats in there are now on sale - getting on for a quarter of the 220 built.

The bulk were bought by investors hoping for capital gain. They can reportedly still get tenants to rent them out, but capital gain will be harder to come by if they try to sell them with so many others doing the same thing down the corridor.

In Leeds too, the situation is said to be bleak.

Estates Gazette has reported that a thousand flats lie empty - but many thousands more are in the pipeline to be built. One can only assume most will never be constructed.

And you don't have to go to big cities to find stories of the flat phenomenon going too far.

In Colchester, one surveyor told the latest RICS lettings survey that there are signs buy-to-let investors failed to do their homework; they believed unrealistic valuations. Investment clubs have been a problem, and surveyors acting for them had better watch their backs, he said.

Block of flatsAnother interesting piece of evidence is that housing associations are reportedly being offered new flats for social housing - at discounts of about 15%. A reversal of the principle of council house sales.

All in all, flats have been where the property market action has been most extreme over the last decade - prices have risen faster there, speculators have invested more in them, homebuilders have constructed them in ever larger numbers.

It suited the authorities, who produced numerical targets to build more dwellings…never mind how large they are.

And there was an apparent economic logic given the growing number of single person households.

Alas, it seems that the new singles are not urban youngsters enjoying a latte on the balcony as depicted in the hoardings. They are elderly widows and divorced dads, who aspire to having a family home with a garden.

And now the market seems to have turned against flats more ferociously than other types of housing.

It's patchy and anecdotal for the moment and local conditions certainly matter.

But when the dust settles watch for blame to be attributed by some people who will have lost money…in a market not so much flat, as falling.


Migrants go home

This title is not a BBC correspondent adopting a slogan the British National Party might use. It is a statement of fact.

Migrants go home, as well as arrive in our country, with consequences for the economy.

And at this conjuncture where many things we’ve been used to for the last decade are now moving into reverse (most notably house prices), it’s worth asking whether inward migration from central Europe is about to turn as well.

The starkest reason to think it might is that the Polish zloty has risen against the pound by 20% in the last year.

The earnings you can make here don’t look nearly as impressive to your friends and family back home anymore.

In addition, wages in Poland are rising fast: 7% in 2007 (with inflation at 4%).

So overall, UK wages relative to Polish wages measured in Zloty, have fallen by a quarter.

That’s a pretty big change in 12 months.

Polish adverts in a west London shop windowA second possible factor that will begin to bite, is that the UK construction boom has probably peaked. The latest data is inconclusive, but new construction orders in the second half of 2007 were down on the first half.

Anecdotally, it is demand in construction that has fuelled a good deal of the central European migration.

Reliable and up-to-date statistics on inward migration are hard to come by. The data we have on accession country workers registering here suggests the inflow peaked in the second half of 2006; but this gives us no bearing on the outflow at all.

The Times reported earlier this month that the Polish embassy had noted that a “tipping point” had been reached, with more Poles returning. But so far, the evidence is mainly anecdotal.

If it is hard to know whether the exodus is underway, it is even harder to assess the consequences.

The City consultancy, Capital Economics concludes that “potential GDP growth is likely to slow gradually from the recent rates of 3% or even higher, to more like 2.7%”.

That is undoubtedly possible. But it is worth thinking about the effects in more detail.

And surely the labour market is where to look. If the economy slows, outward migration might soften the impact. As the demand for labour goes down, instead of unemployment going up, the supply of labour might adjust.

In that sense, one could view migration as a buffer that has softened the inflationary wage pressure of a boom, and which can now soften the labour market effect of a slowdown.

It would almost be as though UK plc had chosen to hire temps for a few years, to see it through a rather busy period.

The outflow of workers might have less benign consequences too.

If migrants have held wage inflation down, an absence of migrants might drive it up, just at a time when there is a threat of inflationary expectations rising.

And away from the labour market, think about house prices! At a time when they are falling, a reduction in migrant numbers might intensify the difficulties faced by buy-to-let investors, and the market as a whole.

This is still in the realm of speculation.

In reality, it’s far too early to call an end to the accession migration boom. And it is undoubtedly the case that many of the recent wave of migrants will settle in the UK permanently.

But one can reasonably hypothesise that if migration reverses, the things that we have associated with migration over the last decade, will do so as well.


Banking parallels

Nationalising a bank is a big deal. But it is not unprecedented.

It is worth reading the history of Continental Illinois, nationalised by the US Federal Deposit Insurance Corporation in 1984.

You can get the full story from the FDIC itself here (pdf link). But let me give you a potted account.

The Bank was the biggest in Chicago and the seventh biggest in the US. It had grown very fast and had received glowing approvals from Wall Street observers in earlier years. (Not dissimilar of course, to Northern Rock which had, for example, been rated a “buy” by Deutsche Bank analysts less than two years ago when its share price was around £11).

A few voices had suggested that Continental Illinois was in fact simply engaging in an ancient banking technique for achieving short term growth – that of taking bigger risks than more cautious rivals would countenance.

Problems first surfaced in 1982 with the collapse of Penn Square Bank in Oklahoma. Continental Illinois lost more than any other bank, having participated in careless oil and gas loans.

Its share price dipped and its credit rating was downgraded. As a result, it became dependent on tapping the foreign money markets for its financing, borrowing short term to keep costs down.

It was not a bank that had secured a very large retail deposit base.

By the spring of 1984, problems in Continental’s loan book were mounting and rumours surfaced of problems. On May 9th, a Reuters journalist asked the bank whether it was true that it was on the road to bankruptcy (the suggestion was dismissed as “totally preposterous”). Foreign depositors didn’t wait to find out how preposterous it was, they started to withdraw their cash.

Even the Chicago Board of Trade Clearing withdrew $50 million and quickly the bank became victim to an “electronic bank run”.

The Federal Reserve ended up supporting the Bank through its “discount window”, but more support was needed.

On May 17th, the FDIC announced that all deposits at the Bank would be guaranteed. Extra federal support was provided, and some assistance from other banks too.

While this bought time, a permanent solution was sought.

The preferred option was for a private takeover of some kind, but it could not be arranged.

In the end, the FDIC itself constructed a complicated arrangement that involved it taking 80% of the equity, with the bank continuing to operate.

You don’t need me to tell you that there are some parallels to Northern Rock here: the bank run, a deposit guarantee, a delay while private solutions are sought, and nationalisation.

And that sequence is not fortuitous. At each stage of the process, there are only a limited number of options, and the ones chosen (then and now) are chosen for a reason – that the others look even more unattractive.

The good news is that when the last pieces of Continental Illinois were eventually sold off (seven years later!) the FDIC had apparently netted a profit. Whether that profit truly compensated for the state’s backing I’m not sure.


Splitting the difference

Today's decision was unusual in that it could have gone three ways - it could have conceivably been a half point cut or no cut at all.
The reason there's such a wide span of options is that the economy is sitting at a crossroads. It could take one of three routes from here, but we don't know which one it will be. Unfortunately, we know those three routes take us to three very different destinations with very different implications for interest rates.

One route is towards an unpleasant recession -- the kind of early 90s experience.. or even worse, the Japanese 1990s experience.

With the housing market falling and the banks suffering, you might reasonably worry about such a scenario. And if you do, you would probably think a half point cut is needed. i.e. the sort of central bank action that you get in the US.

But while the US appears to be on course for some kind of recession, the situation is far from clear-cut in the UK. We still face a second possible road that takes us towards inflation.

With the pound falling and global commodity prices rising, we might actually need some kind of significant slowdown just to kill off the pressure for prices to rise. If we knew we were heading in that direction, it would have certainly justified holding rates as they were.

In the event, the Bank opted to split the difference on rates, evidently hoping the economy will take the third road -- towards a rebalancing of the economy.

This involves a relatively gentle slowdown with only a temporary upturn in inflation. The rebalancing part of the story sees the economy shift away from its dependence on consumer spending towards exports.

We can be sure that this third road is the one we want the economy to take. Unfortunately, we can't be sure it's the one the economy will take. Economists are divided over which direction we are moving in.

The Bank of England's statement -- released with the quarter point cut -- makes pretty clear that they recognise the economy is sitting at a crossroads, and all three routes are still possible.

Their job is simple: to navigate us towards the good rebalancing route, away from the bad inflation and ugly recession.


Today's number: Eight billion

I don't like to reduce the hard work of the much respected Institute for Fiscal Studies and Morgan Stanley to a single number. Their annual Green Budget is after all 299 pages long. (It is nothing to do with environment incidentally, it's green in the sense of a green paper).

Twenty pound notes and coinsBut I know that most of you will not be reading those pages, and good journalism is often about boiling things down.

So I'm happy to boil down the green budget into one number: £8bn.

That's the tax rise needed by spring 2009.

The tax rise is required for the Chancellor's self-imposed fiscal rules. He needs it to ensure he meets his sustainable investment rule. And also to get the key measure of borrowing into surplus (the current balance, the measure used to assess the "golden rule".)

The IFS did not advocate tax rises last year, but over the course of 2007 it's become evident that the government's finances are far shakier than former Chancellor Gordon Brown expected at the time of his last budget.

In fact, the books now look £7bn worse than a year ago. And that, it should be said, occurred before any economic slowdown had time to bite. Corporation tax and stamp duty revenues have already been disappointing.

So what's to be done?

Well, the Institute for Fiscal Studies is the most respected source outside of government on the public finances - and in recent years has had a rather better record than the Treasury at predicting the need for extra money.

Each year it looks at the books, and today it said it thinks taxes need to go up by that £8bn, or the equivalent of about two pence in the pound on income tax if the economy performs more or less as Alistair Darling expects.

If the economy takes a serious dive, vastly more will need to be done.

This may not seem like a great time to hit households with extra tax - after all, the American government is allowing itself to borrow more in order to stimulate its economy.

But the IFS suggests that interest rates should be left to do the work of stimulating the UK...while the government needs to sort out its fiscal position.

In fact, the best reading of the IFS work is that the re-balancing that needs to occur for consumers - who will probably need to save more and borrow more carefully - applies also to the government.

The Chancellor and his predecessor have allowed themselves to assume that in years ahead, the good times will roll and money will flow in to the exchequer.

In fact, it seems the good times have just passed. That means both households and government have to adjust their expectations and spending accordingly (hence the impending economic slowdown).

It's just unfortunate, if the IFS is right, that the consumer and government cycle are so well synchronised. It might have been preferable for the two to be offsetting each other in the economy cycle, not supporting each other.

The real budget is expected in March - the Chancellor can update us on his thinking.

So far, the government has recognised that its medium term fiscal position needs some attention and has been restraining the growth of public spending as a result. But the IFS makes clear, a whole lot more needs to be done on top of that.

It's worth stressing that having boiled the IFS Green Budget down to an £8bn tax rise, that's not a prediction of what will happen - just their statement of what ought to happen.

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