Christian Schulz

The IFS Green Budget 2021, in association with Citi and with funding from the Nuffield Foundation, analysed the ongoing impacts of the pandemic, its economic legacy, and the big decisions confronting Chancellor Rishi Sunak as he prepares for his upcoming Budget and Spending Review.

The IFS Green Budget looks at the ongoing impacts of the COVID-19 pandemic, as the Chancellor aims to secure a lasting recovery and deliver on the Government’s other objectives and priorities.

The IFS Green Budget 2020, in association with Citi and with funding from the Nuffield Foundation, analyses the huge economic trauma since the March Budget and the much heightened uncertainty over the path of the economy in coming years. The findings from chapters covering the economic and fiscal outlook were presented at this event.

The phase of synchronised growth the world enjoyed in 2017 and early 2018 has come to an end. Following two years when the global economy finally expanded faster than its long-run average of 3.0%, growth looks set to slow to 2.8% in 2019. This is a significant disappointment compared with forecasts from this time last year, which predicted global growth of 3.2% in 2019.

The overall outlook for economic growth, and its constituent parts, underpins any fiscal event, with implications for the public finances, public spending, taxation and living standards. Growth in the size of the UK economy – known as gross domestic product or GDP – has averaged 1.3% (on an annualised basis) over the last four quarters. That is somewhat below its potential rate of 1.4% (as estimated by the Bank of England) and the 1.5% growth rate for 2019 that we forecast in last year’s Green Budget, and well below the average of 2.0% per year between 2010 and 2015.

The global outlook and recent trends in the UK economy point to significant headwinds for growth going forwards. Arguably the most important determinant of the UK’s economic trajectory will be the continuing process of leaving the European Union. Brexit no longer ‘just’ determines future relations with the UK’s largest trading partner and the transition towards them. It has become intertwined with the political outlook and thus broader economic policies, including monetary policy.

This presentation was given at the launch of the IFS Green Budget 2019 by Christian Schulz, Citigroup's Lead Economist on the UK.