The Office for Budget Responsibility (OBR) is to press ahead with publishing revised public finance forecasts as planned, rather than risk failing to meet its statutory duties, despite the Chancellor’s decision to cancel the Budget
The OBR usually releases its economic predictions alongside the Budget, and was expected to produce its first forecasts since those it released in March next month.
The cancellation of the Budget, originally scheduled for 6 November, was due to the timing of a December general election.
Now OBR chair Robert Chote has written to the Treasury to say it intends to publish its restated March forecast on 7 November at 9.30am.
Chote said: ‘Following the cancellation of the Budget, we have decided to publish a restated version of our March public finance forecast, incorporating subsequent ONS classification and other statistical changes.
‘Given the importance of these changes for public understanding of the baseline against which the government will wish to judge its fiscal policy options, we believe that it would be useful to explain publicly the impact that these changes would have had on our March forecast.’
In his letter, Chote said that the OBR had been given less than ten weeks in which to produce the proposed Budget forecast, with its analysis based on the premise that a Brexit deal would be agreed. Once Chancellor Sajid Javid announced the budget cancellation on 25 October, all OBR work on the forecasts stopped.
But Chote pointed out that Parliament has specified in the charter for budget responsibility that the OBR should produce its fiscal and economic forecasts at a particular date, at least twice a year, one of which will be for the Budget.
‘So it is not for us to determine the date on which we publish our forecasts, unless the Chancellor leaves it so late to name a date himself that we feel we have to do so to ensure that we are able to public two forecasts within the financial year,’ Chote wrote.
Chote’s letter suggests the impact of the new proposed Brexit deal is potentially closer to the ‘blended’ assumptions the OBR has made previously than the previous declaration negotiated by Theresa May.
However, he also points out that public sector net borrowing has increased proportionately more quickly over the first half of the finance year than the OBR forecast in March for the full year. Extrapolating the increase over the year to date could suggest a full year upward revision of around £10bn. While Chote warns this could be misleading, he also highlights the ‘apparent rapid growth of public services spending’.
There are also complications produced by significant ONS (Office for National Statistics) classification and methodological changes since March, such as the treatment of student loans and unfunded public service pensions schemes, and a large correction to corporation tax data.
Mel Stride, chair of the Treasury committee, has written to the Chancellor to ask about his plans now the Budget is cancelled.
Stride said: ‘It’s been over six months since the previous Chancellor’s final evidence session with the Treasury Committee in April. The current Chancellor has been in office for over three months, and we would hope that he would agree to appear before us sooner rather than later.
‘The Chancellor should also set out whether the OBR’s new analysis will contribute to their statutory duty to publish two forecast each fiscal year. If not, he should set out how he will support the OBR in publishing two forecasts in the remaining 22 weeks of the current fiscal year.’