Following the Government’s Comprehensive Spending Review in November 2015, Chancellor George Osbourne delivered the second Budget of this Parliament’s Conservative majority Government on Wednesday 16th March 2016. During the ILC-UK organised debate, Ben Franklin, Head of Economics of an Ageing Society at ILC-UK, presented ILC-UK's initial analysis of the Budget, looking beyond the immediate ‘winners and losers’ commentary to consider whether the long-term challenges of low productivity, systemic under saving by private individuals and the critical underfunding of adult social care are being addressed. The 2015 Budget and the Comprehensive Spending Review confounded expectations through revealing a revised projected increase of public finance provisions of £27 billion by 2020 thereby enabling the Government to halt proposed tax credit cuts. It also saw the Chancellor stick to his promise of maintaining real terms spending on health, schools and defence while further cutting local government coffers. The 2016 Budget will undoubtedly contain its own surprises, including an anticipated announcement regarding the future of pensions tax relief just one year on from “pension freedoms”.

1. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Budget briefing 2016:
Welcome to the new normal….
Ben Franklin, ILC-UK
Follow us on twitter: @ilcuk @bjafranklin
Email: benfranklin@ilcuk.org.uk

2. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Economic data and latest forecasts suggest
we are living in a new normal:
 Low growth
 Low investment returns
 Low inflation
 Underpinned by global economic headwinds

3. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Low growth

4. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.

5. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Low interest rates and investment returns
Successive market expectations for Bank Rate

6. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Global bond yields – actual and forecasts
Source: OBR

7. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Low inflation

8. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Low inflation

9. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Where is growth coming from? Rising
household indebtedness and falling savings

10. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Global forces are shaping the new normal

11. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.

12. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.

13. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Towards some implications of the new normal
For individuals
 Investment returns may disappoint.
 Low/negative interest rates big disincentive to save.
 Likely rise in household indebtedness
 Potential for asset prices bubbles and consumers losing out due to sudden
price corrections.
For policymakers
 We have reached the bounds of what monetary policy can do.
 Reducing government indebtedness becomes almost impossible in a reduced
growth environment.
 Governments need to do some of the heavy lifting to raise long run productivity
for future generations but ability to influence limited by economic headwinds.
 Will have to carefully consider the sustainability of government finances under
the pretext of lower for longer growth rates and therefore revenues.
 There is a need to develop unconventional means to support saving for the
future.

14. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
In this context: two good, four bad…
Good
- Green light for HS3 between Manchester and Leeds and
other infrastructure spending. But more investment needed!
- Pensions dashboard to simplify for savers.
Bad
- Abolition of Money Advice Service
- Chancellor standing by the fiscal target but may be a false
economy.
- Continued focus on reaching full employment rather than
productivity of labour.
- Nothing of note on affordable housing…
Jury’s out
- New Lifetime ISA to encourage younger people to save
…how will this interact with autoenrol? Will it support saving for
retirement?

15. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Time to invest more for the future generation…

16. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Final slide…will the chancellor cut so drastically in
an election year?

17. The International Longevity Centre-UK is an independent, non-partisan think-tank
dedicated to addressing issues of longevity, ageing and population change.
Many thanks
Ben Franklin
International Longevity Centre - UK
02073400440
Twitter: @ilcuk @bjafranklin
Email: benfranklin@ilcuk.org.uk