In a Jam? Changes in the fiscal forecast

Transcription

1 In a Jam? Changes in the fiscal forecast Thomas Pope IFS post-autumn Statement 2016 briefing 24 November 2016

2 Changes to the underlying forecast billion Budget March AS November 2016 (premeasures) In a Jam: hanges in the fiscal forecast

3 Changes to the underlying forecast billion Budget March Classification changes: New March Baseline AS November 2016 (premeasures)

4 Changes to the underlying forecast billion Budget March Classification changes: New March Baseline OBR s estimate of Brexit effect on borrowing: billion ( 290 million per week) AS November 2016 (premeasures)

5 Changes to the underlying forecast billion Budget March Classification changes: New March Baseline Higher inflation AS November 2016 (premeasures)

6 Year on year change (%) Comparison of CPI inflation forecasts 3.5 OBR Mar OBR Nov BofE Nov Sources: Office for Budget Responsibility and Bank of England

7 Year on year change (%) Comparison of CPI inflation forecasts 3.5 OBR Mar OBR Nov BofE Nov Sources: Office for Budget Responsibility and Bank of England

8 Year on year change (%) Comparison of CPI inflation forecasts 3.5 OBR Mar OBR Nov BofE Nov Sources: Office for Budget Responsibility and Bank of England

9 Changes to the underlying forecast billion Budget March Classification changes: New March Baseline Higher inflation Weaker economy AS November 2016 (premeasures)

10 2016Q1 2016Q3 2017Q1 2017Q3 2018Q1 2018Q3 2019Q1 2019Q3 2020Q1 2020Q3 2021Q1 2021Q3 2022Q Q1=100 Comparison of real growth forecasts OBR Mar BofE May OBR Nov BofE Nov Presentation title to go here Sources: Bank of England and Office for Budget Responsibility

11 2016Q1 2016Q3 2017Q1 2017Q3 2018Q1 2018Q3 2019Q1 2019Q3 2020Q1 2020Q3 2021Q1 2021Q3 2022Q Q1=100 Comparison of real growth forecasts OBR Mar BofE May OBR Nov BofE Nov Growth 1.4% lower than forecast in March Presentation title to go here Sources: Bank of England and Office for Budget Responsibility

12 2016Q1 2016Q3 2017Q1 2017Q3 2018Q1 2018Q3 2019Q1 2019Q3 2020Q1 2020Q3 2021Q1 2021Q3 2022Q Q1=100 Comparison of real growth forecasts OBR Mar BofE May OBR Nov BofE Nov Growth 1.4% lower than forecast in March Growth 0.8% higher than forecast by Bank of England Presentation title to go here Sources: Bank of England and Office for Budget Responsibility

13 Changes to the underlying forecast billion Budget March Classification changes: New March Baseline Higher inflation Weaker economy Higher equity and oil prices Lower interest rates In year and modeling changes AS November 2016 (premeasures)

14 Changes to the underlying forecast billion Budget March Classification changes: New March Baseline Higher inflation Weaker economy Higher equity and oil prices Lower interest rates In year weakness and modeling changes AS November 2016 (premeasures)

15 Changes to the underlying forecast billion Budget March Classification changes: New March Baseline Higher inflation Weaker economy Higher equity and oil prices Lower interest rates In year weakness and modeling changes Change on New Baseline AS November 2016 (premeasures)

16 Changes to the underlying forecast billion Budget March Classification changes: New March Baseline Higher inflation Weaker economy Higher equity and oil prices Lower interest rates In year weakness and modeling changes Change on New Baseline AS November 2016 (premeasures)

17 Autumn Statement policy changes billion AS pre-measures AS November

18 Autumn Statement policy changes billion AS pre-measures Tax changes: Giveaways Takeaways AS November

19 Autumn Statement policy changes billion AS pre-measures Tax changes: Giveaways Takeaways Spending changes: Welfare Other spending AS November

20 billion ( prices) Total departmental spending to Real cut 14.5 billion (1.6%) to Unprotected: -7.3% ( 11.3 bn) Health: 7.1% ( 8.5 bn) TDEL - Nov TDEL - Mar Financial year

21 billion ( prices) Current departmental spending to Real cut 19.3 bn (6.2%) to Financial year RDEL - Nov RDEL - Mar

22 billion ( prices) Capital departmental spending to Real increase 4.7 billion (9%) to Financial year CDEL - Nov CDEL - Mar

23 R&D spending as a share of GDP, by sector R&D spending Higher education Government Business Source: OECD MSTI Indicators. Figures for 2014, except USA (2013).

24 % national income PSNI to Nov-16 Forecast Mar-16 Mar-08 Financial year

25 % national income PSNI to Nov-16 Forecast Mar-16 Mar-08 Financial year

26 % national income PSNI to Nov-16 Forecast Mar-16 Mar-08 Financial year

27 billion March and November borrowing plans compared Financial year March November Source: Office for Budget Responsibility

28 billion March and November borrowing plans compared Financial year March November Source: Office for Budget Responsibility

29 % of national income Government to borrow 16bn more than Labour s plans implied in Outturn Forecast Conservatives Labour Financial year Source: Office for Budget Responsibility; Institute for Fiscal Studies.

30 Summary Underlying economic changes led to 18 billion more borrowing in A large downgrade, though smaller than in 2011 or Additionally, Mr Hammond chose to loosen fiscal policy mostly through more investment. Public Sector Net Investment is set to rise above 2% of national income, higher than its level for most of the last 3 decades. In particular, housing, telecoms, roads and R&D received extra funds. A worse forecast and a net giveaway mean the path of borrowing is now above the path implied by Mr Balls 2015 election plan.