鈥淭hings are looking pretty tough,鈥� Mr Johnson began his presentation which charted a deteriorating economic outlook for the next five years.
鈥淚 would describe this government as Augustinian, as in Augustine of Hippo: 鈥楲ord make me virtuous but not yet鈥� 鈥� this is how I would describe quite a lot of the government鈥檚 economic policies,鈥� he added 鈥� a description which would become a common theme throughout his presentation.
Looking ahead to the Spring Forecast, due at the end of March, Mr Johnson warned the Chancellor had left herself 鈥渘o space at all against her iron clad fiscal rules, meaning she will be almost certainly breaking those rules鈥�.
This would mean something would need to be done on tax or spending, Mr Johnson said.
鈥淥ne problem is the don鈥檛 have an underlying theory for growth 鈥� no sort of theory of public service reform as there was under the Blair government. For example, they say 鈥� let鈥檚 deregulate while imposing new regulations, let鈥檚 focus on growth while using least growth friendly way of increasing taxes.鈥�
Growth abysmal since 2008
鈥淎t least in the rhetoric, the government is right to focus on growth,鈥� Mr Johnson said, outlining data which showed that average earnings/medium earnings are the same now as they were in 2008. 鈥淲e have not seen a nearly 20-year period like that since Napoleon was trying to invade 鈥� that is the scale of how extraordinary this period has been.鈥�
鈥淚n the long-term they have the right set of ideas, in the short-term a whole series of measures which are going to damage growth in the short-run.鈥�
Paul Johnson, Director of the Institute for Fiscal Studies
Mr Johnson acknowledged the government had made lots of positive announcements and 鈥渉ad the right idea on some things鈥�, such as planning reform, and housebuilding targets, as well as the third runway planned for Heathrow, although he expressed doubt as to whether these would come to fruition.
鈥淭he political problem with all of this is first we don鈥檛 know if it will happen [鈥 second if they do happen, the impact on growth will be well beyond the end of this parliament.鈥�
Employers鈥� NI increase
鈥淪o what have they [the government] actually done?鈥� Mr Johnson questioned. 鈥淭his comes back to my Augustinian point. A whole load of things which are very clearly not good for growth.鈥�
鈥淢y head hit the table when the Chancellor announced an increase in stamp duty on second properties,鈥� Mr Johnson admitted. 鈥淭his is the worst tax there is [鈥 it is extraordinarily bad for growth.鈥�
He said the government had chosen the 鈥渓east growth-friendly鈥� way of raising money by focusing on Employers鈥� NI contributions.
鈥淭his is clearly a breach of their manifesto commitment,鈥� he said.
鈥淚n the long-term they have the right set of ideas, in the short-term a whole series of measures which are going to damage growth in the short-run.鈥�
Defence spending knock-on effect
Mr Johnson said the Autumn Budget had been big 鈥渋n the sense of lots of money鈥�, but not in terms of tax reform. 鈥淚t really was just a budget to increase tax and spending without changing anything very fundamental.鈥�
He said for the first time in decades, the government is taking more tax from the public than what it is giving back, other than their spending on debt interest, to prevent debt rising further. 鈥淭his is not a recipe for a happy electorate,鈥� he noted.
Referring to the Prime Minister鈥檚 announcement earlier that day, that defence spending will rise to 2.5% of GDP by 2027, Mr Johnson said this was a 鈥渞emarkable change politically鈥� in terms of the aid budget which has been cut to 0.3%.
鈥淐ontinued increases in defence are going to cause a real problem for other bits of public services,鈥� he said.
鈥淗ealth is the big beast here. We have spent far more than any other public service 鈥� when we look into the future it鈥檚 health, health, health that drives continued increases. Are those taxes going to come back down in my lifetime? I can鈥檛 see a world where that happens.
鈥淥ne of the reasons Rachel Reeves has got a big problem is that she鈥檚 going to go to her cabinet colleagues when it comes to the June Spending Review, saying, at best, 鈥榶ou鈥檙e getting nothing鈥�, and quite possibly telling them they鈥檙e going to get cuts.鈥�
Mr Johnson predicted that spending plans would get even tighter, meaning either cuts to some government departments or tax rises would be needed.
鈥�The Chancellor has got a very difficult set of choices to make at the end of March and the Spending Review in June.鈥�
Paul Johnson, Director of the Institute for Fiscal Studies
The right words, but will they bring the right results?
Despite this, Mr Johnson said he was in many ways encouraged by announcements the government has made.
One of the best speeches he said he heard from the Prime Minister at the Labour Party Conference was when he made it clear there were choices that had to be made to get the growth needed.
鈥淲e鈥檝e got all the right words about the long-term [鈥 even when they result in negative immediate publicity. But more concerning is that the immediate changes we're seeing don't look to me to be terribly consistent with that.
鈥淭he Chancellor has got a very difficult set of choices to make at the end of March and the Spending Review in June.鈥�
The Henry Plumb Lecture is held every year and brings together key players from the agriculture sector, to speak on and debate the latest thoughts on farming, and where the industry is headed in the future.
Meet the speakers from this session
Paul Johnson
Director of the Institute for Fiscal Studies
As well as analyses of the economy and future of government spending, Paul also considers the economics of climate change and the path to net zero, the effects of inequality, and the long and short-term impacts of shocks including Brexit and Covid-19.
Paul has published and broadcast extensively on various issues in the economics of public policy including tax, welfare, inequality and poverty, pensions, education, climate change and public finances. He is the author of major books on pensions, tax and inequality and is a regular contributor to news and current affairs programmes across the UK broadcast media.
As well as a previous spell at the IFS in the 1990s (including a period as deputy director) Paul has been chief economist at the Department for Education and director of public spending in HM Treasury. At the Treasury his responsibilities included public sector pay and pensions and climate change policy. In the latter role he worked closely with Nicholas Stern on his review of the economics of climate change. Other positions include a period as head of economics at the Financial Service Authority and as a senior associate with Frontier Economics.
Paul was also deputy head of the Government Economic Service. He served on the council of the Economic and Social Research Council and was elected to the council of the Royal Economic Society. He was a founder council member of the Pensions Policy Institute and has led a review into the policy of pensions auto-enrolment. Other roles and bodies Paul has been involved in include the council of the Family and Parenting Institute, the Pension Provision Group, the Commission on taxation and citizenship, the Youth Justice Commission and the Commission on Living Standards.
Terry Jones
NFU Director General
Leaving FDF at the end of 2014, he took up the post of DG at the Provision Trade Federation (PTF) looking after the interests of businesses involved in the UK bacon and dairy trade.
Before working at FDF and PTF Terry worked for the NFU from 2002-2011 in a variety of roles including Head of Government Affairs, Head of Food Chain and Director of Communications.
Terry lives in Cheshire with his wife Emma and their two daughters.
