The last full week of November saw some bitter arguments about the end of the current lockdown in England, heated debates about tiers, and controversial shifts in restrictions in the other home nations too.
It gave the Chancellor Rishi Sunak some space to deliver bad news, but as with everything it was not without controversy and some rather scary headlines.
These included a 11.3 per cent likely fall in GDP for the UK this year the biggest fall for 300 years, a prediction of unemployment hitting 7.5 per cent and the national debt now being higher than £2trillion.
Even the nature of the statement was up for debate. It was not a comprehensive spending review running to the end of the Parliament. That has been postponed a few week's previously. Yet although it was meant to be announcing a year’s spending, it included big pledges for several years on defence and infrastructure. It also included a big debate about gaps in the figures.
That almost eclipsed the measures taken. The Lancashire Business Review listed the key points of the review here, while the left-leaning Observer criticised the review for its lack of support for poorer sections of society.
Trustnet asked many fund managers what it all meant for the economy going forward. Among others, it quoted Premier Miton Investors Neil Birrell saying: “After the forecast bounce next year and in 2022, growth will fall back again just over 2 per cent, than back below 2 per cent for the next two years.
“This illustrates that the scars are long lasting; the scale of debt and unemployment are fundamental to the problem."
Actually the best analysis came not from the media but from various thinktanks so we quote them below.
The source of many of the economic predictions is the Office for Budget Responsibility - and its headline figure was Coronavirus pushes the budget deficit to almost £400 billion.
Maybe even more concerning is the speed with which the public finances recover – not very swiftly at all including a hole which may need to be filled by cuts or taxes.
To quote the OBR: “Coronavirus has caused our economy to shrink 11 per cent this year – the largest drop in over 300 years. But the economy recovers its pre-virus level by the end of 2022.
"Support for public services, households and businesses costs £280 billion this year, pushing the deficit to £394 billion (19 per cent of GDP, the highest since 1944), and debt above 100 per cent of GDP (for the first time since 1960). Our central forecast shows £20-30 billion in spending cuts or tax rises would be required to balance revenues and day-to-day spending and stop debt from rising by the end of this Parliament.”
Notably the Institute for Fiscal Studies believes that the OBR is likely being overly optimistic.
It said: “It seems more likely than not that spending will end up significantly higher than set out today, and so borrowing in 2024-25 will be considerably more than the £100 billion forecast by the OBR. Either that or we are in for a pretty austere few years once again, or for some significant tax rises.”
And this is a grim take from the Resolution Foundation especially on wages. As it says: “A lastingly-smaller economy means lower wages, down by £1,200 a year per worker in 2025 compared to pre-pandemic expectations. The hit to household incomes that will follow comes on top of the unprecedented financial crisis and Brexit-induced living standards squeeze of the 2010s.
"As a result, household incomes, which grew by 40 per cent in the 15 years prior to 2008, are set to have only increased by a quarter of that (10 per cent) in the 15 years since.”
This will not necessarily impact most IFA clients, but it is grim prospect for society.
After that long assessment, we bring you three other stories from the trades.
Writing in Money Marketing, Garry Heath, the director general of the Impartial Financial Advisers Association has begun to analyse some of the firms which has fallen on the FSCS and to categorise them. He suggests it exposes many of the myths about FSCS defaults.
Seven former Premier League footballers have launched a High Court challenge against a financial adviser over £3m of allegedly mis-sold pensions and investments. The retired footballers have claimed they were ill-advised by Kevin Neal, who was a director of a number of now defunct financial advice firms reports FTAdviser.
SSAS provider TWS Pensions Limited has entered liquidation after being found potentially liable for a tax charge exceeding £11m relating to unauthorised payments.