The head of an influential economic research institute said Thursday that he’ll be dead before U.K. debt falls back below pre-financial crash levels.
Paul Johnson, director of the Institute for Fiscal Studies, was giving the firm’s traditional post-budget briefing, and said forecasts show the U.K. is in danger of losing two decades of earnings growth.
Johnson said if growth continues as forecast and the deficit remains at just over 1 percent of national income, it would take decades to reduce debt.
He said that “forecasts show that GDP per capita will be 3.5 percent smaller in 2021 than forecast less than two years ago in March 2016. That’s a loss of £65 billion to the economy. Average earnings look like they will be nearly £1,400 a year lower than forecast back then, still below their 2008 level. We are in danger of losing not just one but getting on for two decades of earnings growth.”
Johnson added that it would take the U.K. “until well past the 2060s for debt to fall to pre-crisis levels of 40 percent of national income. That assumes no recessions for the next half century.”
“I’ll be dead,” he added.
Johnson also said that although the budget saw Chancellor Philip Hammond loosen the purse strings, it was not an end to austerity, “not by a long chalk.”
He also said Brexit was not to blame for growth forecasts being revised down in the budget.
“The economic impact wrapped up in [the independent Office for Budget Responsibility] forecasts is the same as they made a year ago based on what they describe as some fairly ‘broad brush’ assumptions. Just to recap on what the OBR said a year ago. Their view then, accepted by government, was that the Brexit vote would result in a £15 billion-a-year deterioration in the public finances. They have not changed that judgment. The additional slowdown in this year’s forecasts are not put down to Brexit.”