Great to see Rachel Reeves strike a clear note on fiscal sustainability & reducing debt at #LabourConference2025. Sending the right signal ahead of the Budget is crucial — and markets look to have responded positively.

Support is growing for adressing the £22 billion annual taxpayer losses at the Bank of England.

To do so, both BoE and HMT would need to act. On Thursday the Bank should stop active bond sales. And HMT should claw back interest rate losses via a targeted levy.

www.telegraph.co.uk/gift/5259508...

I go into these points in more detail in my piece — do give it a read!

3️⃣ The FT rightly note that government policy could raise productivity, but impacts may take time to materialise. Even a modest +0.1ppt medium-term boost would be material - so the OBR should wait until policy details are clearer before baking them in.

2️⃣ The BoE recently upgraded its near-to-medium term productivity forecast. Recent LFS data has actually been in line with the OBR’s view. A downgrade larger than 0.1ppt would make the OBR more pessimistic than the BoE — an unlikely stance.

1️⃣ Even the “official” LFS data is highly uncertain. Between 2002 Q2–2016 Q3, productivity growth was typically revised by around ±0.6ppts three years after the first estimate: ons.gov.uk/employmentan...

The FT illustrate uncertainty using recent upswings in admin data (see my recreation below) — adding even more fog for the OBR to navigate. But this isn’t the only source of uncertainty. There are several reasons why the OBR should remain cautious…

Very pleased to see my analysis on UK productivity growth picked up by the FT this morning. Their piece highlights the uncertainty around the OBR’s productivity forecast — and how stark the fiscal implications could be at the Budget. A few of my reflections below 👇

See here, where I discuss this view in more detail: www.ippr.org/articles/nav...

4/ Uncertainty is also high. Big revisions are typical, and the data remains is in development. +/-0.6ppts revisions have been common – further expected with upcoming changes to the LFS. The OBR is navigating in the fog – it should wait for a signal before changing direction.

3/The OBR is often optimistic on productivity - but public investment is high, and we have a raft of productivity-enhancing policy down the tracks. If they downgrade, the OBR may have to upgrade again once policies are final and fully assessed.

2/Recent weak data was expected - we are still at the tail end of high inflation disruption. All forecasters expect a turnaround. The BoE in fact revised up its (respected) forecast, now similar to the OBR. Recent outturn data is thus not a reason for the OBR to change.

1/Productivity really matters - strong growth allows us to produce more, collecting extra tax. Today's data still looks weak, seemingly vindicating calls for a costly OBR downgrade - but closer assessment reveals a strong argument for keeping steady.