The Office for Budget Responsibility has been attracting flak for its more optimistic fiscal forecasts.

Some economists are concerned that the new projections - which gave the chancellor a welcome windfall which he rapidly spent - may be unrealistic.

Chris Giles of the FT has the details:

Some thought the OBR was too optimistic on revenues.

Andrew Goodwin of Oxford Economics said the fiscal watchdog “provided the chancellor with an unexpected free pass” on the public finances. He said the OBR had a history of optimism on tax revenues and “today’s forecast revisions move them even further towards the optimistic end of this scale”.

Fathom Consulting said the chancellor was paying for higher than expected public spending with “notional revenues”, and Francois Cabau of Barclays said caution was required over the Autumn Statement details that “the bulk of the fiscal performance would be owing to improved tax receipts and a lower interest rate burden”....

More here.

And that’s the end of the Institute for Fiscal Studies briefing.

We’ll have analysis later. But in the meantime you can scroll back to 1pm for the IFS’s full verdict on George Osborne’s plans.

And remember, all their work is online here.

Q: Will there be a two-tier benefit system as people are moved onto Universal Credit?

Andrew Hood agrees that any system that introduces cuts for new claimants but protects existing ones creates a two-tier system.

There is transitional protection, but expressed in cash terms, which means that people should not receive less under the new system (inflation, though, could erode that protection).

Transitional protection can last a very long time, Paul Johnson adds.

Q: And how can transitional protection be lost?

Several ways:

1. Acquiring or losing a partner loses protection.
   
2. Losing off UC entirely - if one earns more than the maximum allowed in a week and no longer qualify.
   
3. If my income falls, my UC entitlement doesn’t rise, until I’ve cleared the transitional protection.
   

The IFS are helpfully uploading all their presentations, so you can see their work on the Autumn Statement and Spending Review.

Sky’s Ed Conway sums it up:

Q: Is George Osborne right to spend the ‘windfall’ from the OBR’s improved fiscal forecasts?

Gemma Tetlow agrees that the chancellor’s response is a little ‘asymmetric’ (as the chancellor could have banked the money and gunned for a more rapid fiscal consolidation).

Paul Johnson gives the chancellor some (guarded) support -- saying the alternative would have been to press on and slash police spending, foreign spending, or hike taxes.

It doesn’t seem to me to be not wise to not implement massive spending cuts if you think you might not have to.

Q: Is Iain Duncan Smith right when he says today that under the new Universal Credit system, people are moving into work faster and earning more than under the current?

Paul Johnson declines to comment on the behaviour of the very small number of people already on UC; the IFS’s work relates to the distributional impact when it is fully implemented.

Onto questions.

He says that the government overestimated the savings from the tax credit cuts, which is why the u-turn only yields £3.4bn not the £4.4bn expected.

Q: What is the distributional impact of Universal credit system?

The impact is complicated, and doesn’t really match people’s place on the income scale.

Single earner couples tend to do well, while two income families and single parents do less well, Hood adds.

The IFS has also crunched some numbers, showing how the universal credit system will change the benefit system:

Universal credit vs. the system it is replacing

• UC now represents additional cut on top of other changes
  • – Cuts benefit entitlements by £3.7bn a year in the long run
  • – Existing claimants protected in cash terms when moved onto UC
• 4.5m working families affected by introduction of UC
  • – 2.6m lose an average of £1,600 a year
  • – 1.9m gain an average of £1,400 a year
  • – Total cut of £1.5bn a year
• 1.8m non-working families affected by introduction of UC
  • – 1.2m lose an average of £2,500 a year
  • – 0.6m gain an average of £1,000 a year
  • – Total cut of £2.2bn a year

Abandoning the planned cuts to tax credits will cost £3.4bn in the 2016-17 financial year, Andrew Hood explains - not the £4.4bn expected.

Andrew Hood of the IFS is now running through the latest welfare changes.

The big picture is that:

• Government still planning £12bn cut to annual benefit spending by end of the parliament
  • – But less than half delivered by 2017-18
  • – £4bn from freeze to 2020, £4-5bn additional cuts to universal credit, £11⁄2bn cuts to housing benefit spending (plus other smaller changes)
• Benefit spending excluding state pensions in 2020-21 forecast to be at its lowest as a share of national income for 30 years

Giving councils full retention of business rates is ‘genuinely revolutionary’, David Phillips adds, and part of the government’s devolution of powers:

The IFS is also concerned about Osborne’s plan to allow local councils to raise an extra 2% from residents, to fund social care in their area.

The problem is that councils who already charge the highest bills can obviously raise more cash than an area with lower charges.

Councils in “leafy areas with high council tax and relatively low social care needs”, such as Rutland, benefit most from this change, says the David Phillips, senior research economist at the IFS.

It is also “very tricky” to see how central government can make sure that extra funds are devoted to social care.

The iFS is now outlining the huge funding cuts which local government’s now face.

If they keep cutting grants in line with the existing formula, then councils who have already taken the biggest hit will suffer the most.

Reminder, you can watch the IFS briefing online here.

Here’s Katie Allen’s news story on the Institute for Fiscal Studies new report:

It won’t have escaped anyone’s notice that George Osborne blew through his welfare cap yesterday, Gemma Tetlow deadpans.

She reminds us that the OBR expects the government to breach the cap three years running.

Reclassifications in funding sources means the government will just hit its cap in the following two years, Tetlow adds, suggesting that such ‘reclassifications’ need to be scrutinised closely to ensure the government doesn’t fudge this issue.

George Osborne has slightly eased the pace of fiscal consolidation, Tetlow explains.

As this chart shows, the UK is on track to reach the same point, but more slowly.

There’s a slight change to the ‘mix’ - tax rises now makes up 17%, up from 16%. But it’s still mainly dependent on welfare cuts.

The only non-protected department to avoid the squeeze this time is defence, Gemma Tetlow adds - last time it took a big cut, this time its seen its budget rise (to address new security concerns)

Despite the lower spending cuts, it won’t be an easy ride of the next few years, Tetlow continues.

And this chart shows where the axe has fallen hardest - including Transport, and the Department for Business, Innovation and Skills.

Osborne’s new stamp duty levy on new second homes and buy-to-let properties will he hard to implement, Gemma Tetlow suggests.

Someone could, for example, buy a house, live in it for a bit [thus avoiding the levy], and then rent it out.

Gemma Tetlow of the IFS is explaining how Osborne benefitted from various positive forecasting changes.

The overall effect was to strengthen the public finances by around £4bn in the medium term.

This slide shows the details:

There are ‘big distributional effects’ from the cuts in funding from central government to local government, Johnson says.

Changes to the business rate system, allowing local authorities to retain growth in revenue, is a “genuinely big change”.

It means councils will be more dependent than ever on the economic performance in their area.

On the tax credits u-turn, Paul Johnson says there is no net change in the long run - because Universal Credit is already legislated to replace current benefits.

He confirms that 2.6m families will be worse off under UC, losing around £1,600 each.

But another 1.9m households will be better off.

Johnson warns that housing associations are facing particularly deep cuts to their grants, around 40% in 2017.

George Osborne has set himself an inflexible target, to achieve a surplus this parliament, Paul Johnson continues.

And there’s only a 50:50 chance that he’ll achieve it.

If he fails - perhaps because the Office for Budget forecasts are too optimistic - then the chancellor faces three choices; revise spending, raise taxes, or abandon the surplus target.

The IFS is also warning that - despite scrapping tax credits cuts - George Osborne’s plan still means reducing non-pension benefits to their lowest level as a share of national income for 30 years.

Apparently they let the chancellor loose on an actual new house....

The Institute for Fiscal Studies gives its verdict on the Autumn Statement in around 40 minutes time - it will be live-streamed here.

Some of today’s newspapers claim that Osborne unveiled ‘the end of austerity’. The Daily Mail sounds positively cross about it (like most things.....):

It’s true that Osborne has loosened the pace of cuts. But there are still chunky cuts to public spending, an increase in tax receipts, and a commitment to a surplus by 2020. Plus significant welfare cuts.

And that’s why Paul Johnson, head of the IFS, believes the age of austerity isn’t over.

German bank Berenberg is predicting that George Osborne will not achieve the cuts outlined yesterday.

Their economist, Kallum Pickering, says:

George Osborne has set a precedent in the last five years that he won’t break over the next five years. He makes promises for cuts that he never quite gets around to. This is good news for the economy today, but a risk for tomorrow.

This chart shows how the UK has consistently borrowed more than predicted:

Pickering also reckons it will be “impossible” to cut day-to-day spending as deeply as targeted.

In our view, the plan to bring the deficit down by reductions in day to day spending is not feasible. This year, total government spending will be a little over 40% of GDP. The Government is targeting to reduce this total to around 35% of GDP by 2020. This will be the lowest level since 2000 and even below the Thatcher years...

We may need George Osborne’s brick-laying skills -- his plan to build 400,000 new homes could founder if enough trained builders can’t be found.

It may also bring little short-term help to renters. Frank Nash, partner at chartered accountants Blick Rothenberg, explains:

“The chancellor has openly admitted that more affordable housing, including the private sector, needs to come forward to allow people to become owner occupiers and achieve their aspirations. However, it will take at least five years and, until those homes are built, young families have no choice but to rent.

“The problem is that until these new homes are built, private rented property is price inelastic. Landlords need to protect their investment and are expected to pass the cost on in the form of higher rent. This reduces a tenant’s ability to save a deposit for a home of their own, and in turn their ability to make best use of the range of the Help-to-Buy initiatives.”

Nash also fears that the new 3% stamp duty levy on second-home and Buy-to-Let landlords could rebound, and be passed onto renters.

There’s something slightly clichéd and unconvincing about politicians tromping around building sites....

..but at least George Osborne has been learning some new skills.

George Osborne has already warned that he won’t shy away from “difficult decisions”.

The chancellor has spent this morning defending criticism of his autumn statement -- and claims that he’s abandoned austerity by committing to spend his £27bn fiscal windfall.

He also declined to apologise or to admit a blunged over the tax credits u-turn, as we report here:

Asked by the Today presenter Nick Robinson whether he was admitting he had made a mistake and was apologising or whether he had simply been forced to change tack by critics, the chancellor said that his “central judgment” to move to a lower welfare and higher wage economy was the right one.

French bank BNP Paribas also expects the ECB to cut its deposit rate (paid by banks on their ECB deposits) deeper into negative territory.

Currently, it is minus 0.2% - and BNPP thinks it will be slashed to -0.4% next Thursday.

Other banks expect a 10 basis point cut, to -0.3%.

Barclays’ shares are actually up this morning, gaining 3p to 224p, despite the bank being shamed for cutting corners on financial crime checks.

Kit Juckes, top currency strategist at Societe Generale, says we should expect something pretty serious from the ECB at next Thursday’s meeting.

Dipping into classical texts, Kit writes:

“He who exercises no forethought but makes light of his opponents is sure to be captured by them”.

The quote’s from Sun Tzu’s The Art of War and while I don’t think for a second that Mario Draghi is anyone’s opponent, he is regularly under-estimated.

It’s a step up from quoting Chairman Mao, anyway....

So what devilish plan might general Draghi unleash? One option is a “split-level” negative rate, meaning more punishing negative rates for banks who leave lots of money at the ECB.

Kit says:

It’s not really obvious that such a policy would drive rates (and in particular, longer-dated rates) any lower, but it reinforces the sense that Mr Draghi is committed to further easing next month.

Mario Draghi hinted strongly in October that he could take more action if needed, to get the eurozone away from deflation.

So, he risks a backlash if the ECB isn’t decisive next week.

As Ken Wattret at BNP Paribas put it to Reuters:

“It cannot run the risk of disappointing markets, having raised expectations of action.”

The Resolution Foundation, a UK think tank, has warned that poor British families are still losing out, despite the tax credit reprieve announced in yesterday’s sutumn statement.

And that’s because of longer-term changes to the UK welfare system, which will bring in the universal credit.

Torsten Bell, Director of the Resolution Foundation, explains:

The attention now turns to the longer term changes to the welfare system the Government has put in train. All the post-2020 welfare cuts announced in the Summer Budget remain in place and will eventually affect millions of families as Universal Credit is rolled out nationally.

“New Resolution Foundation analysis shows that these cuts fall overwhelmingly on poor working families.

And this chart shows how low-earners are still set to lose out over this parliament: