Box sets » Forecast process

In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our November 2022 Economic and fiscal outlook, we adjusted our economy forecast to take into account plans for the energy price guarantee (EPG) and consider the impact of tax and spending measures on the supply side of the economy.

Economy categories:
Labour market    Inflation    Potential output   

Cross-cutting categories:
Fiscal multipliers    Forecast process   

In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our March 2022 Economic and fiscal outlook, we adjusted our economy forecast to take into account plans to loosen fiscal policy from 2022-23, to support households with the cost of living crisis, as well as for several specific measures, such as the cut in fuel duty and the freezing of the BBC liscence fee.

Economy categories:
Inflation   

Cross-cutting categories:
Forecast process    Fiscal multipliers   

In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our October 2021 Economic and fiscal outlook, we adjusted our economy forecast to take into account plans to loosen fiscal policy from 2022-23, as well as for several specific measures, including the impact of the HSC Levy on earnings.

Economy categories:
Inflation    Labour market   

Cross-cutting categories:
Forecast process    Fiscal multipliers   

Our pre-measures fiscal forecast was closed earlier than usual to give the Chancellor a stable base to make decisions for the Budget and Spending Review. This box described the impact of news since the forecast closed on headroom to the Government's fiscal targets.

Cross-cutting categories:
Forecast process   

In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our March 2021 Economic and fiscal outlook, we adjusted our economy forecast to take into account plans to loosen fiscal policy in 2021-22, before tightening from 2023-24 onwards, as well as for several specific measures, including the impact on our business investment forecast of temporarily much more generous capital allowances.

Economy categories:
Business investment   

Cross-cutting categories:
Fiscal multipliers    Forecast process   

Our ability to forecast accurately is heavily dependent on the quality of the data we can use. In this box we explained how statistical and expenditure data could be distorted by problems in delivery of the benefit, and the difficulties this creates in identifying emerging trends in the data.

Fiscal categories:
Welfare spending    Incapacity and disability benefits   

Cross-cutting categories:
Forecast process    Data limitations   

There are several possible approaches to forecasting benefit spending. In this box we outlined the key issues the modelling of disability benefits needed to address, the three approaches we used to forecast spending, and the strengths and limitations of each, concluding that a combination of approaches was better than reliance on any single one.

Fiscal categories:
Carer's allowance    Welfare spending    Incapacity and disability benefits    Tax credits   

Cross-cutting categories:
Forecast process    Data limitations   

Forecasting mortgage debt
Before November 2016, our forecasts for mortgage debt (secured debt) were based on forecasts for mortgage demand and supply, as the determined by relationships in our house price model. In light of systematic forecast errors, this box outlined changes to our methodology for forecasting mortgage debt, which moved to an approach based on an accumulation identity.

Economy categories:
GDP by expenditure    Residential investment    Household balance sheet   

Cross-cutting categories:
Forecast process   

Stamp duty land tax (SDLT) is one of the more volatile sources of receipts. In our 2016 Forecast evaluation report, this box identified a number of reasons why forecasting SDLT receipts is challenging, including the concentration of receipts in a small proportion of expensive properties and the effects of significant policy changes.

Economy categories:
Property transactions    Housing market   

Fiscal categories:
Stamp duty land tax    Receipts   

Cross-cutting categories:
Forestalling    Forecast process   

External forecasters’ revisions to GDP growth and borrowing
Our 2016 Forecast evaluation report was published around four months after the EU referendum was held. Over that period forecasters had revised their real GDP growth and borrowing forecasts. This box summarised those revisions and the relationship between them. It illustrated the uncertainty that forecasters faced in trying to predict the impact of the referendum result and Brexit on the economy and public finances.

Economy categories:
Real GDP   

Fiscal categories:
Public sector net borrowing   

Cross-cutting categories:
External forecasts    Forecast process   

Modelling changes were made to the deductions element of the VAT model and to introduce a new model for NICs. The box outlined the modelling changes and the likely effect on receipts.

Fiscal categories:
Receipts    National Insurance Contributions    VAT   

Cross-cutting categories:
Forecast process   

We use a large number of fiscal forecasting models to generate our bottom-up forecasts of the public finances. This box outlined why models are essential forecasting tools, the various types of model used and how their performance is assessed.

Fiscal categories:
Receipts    Environmental levies   

Cross-cutting categories:
Forecast process   

Revisions to the central government net cash requirement forecast
Our March 2015 Economic and fiscal outlook forecast highlighted that CGNCR ex outturn were significantly lower than what implied by our fiscal forecast. This box decomposed the revisions to CGNCR ex since our March 2015 forecast and it explained the factors that contributed to the divergence between our CGNCR ex forecast and the outturn.

Fiscal categories:
Current government net cash requirement    Financial transactions    Network Rail   

Cross-cutting categories:
Forecast process   

Revised assumption for the long-run wedge between RPI and CPI inflation
RPI inflation differs from CPI inflation for a number of reasons. Collectively the difference between the two measures is refered to as the 'wedge'. In light of more evidence this box, from our March 2015 Economic and fiscal outlook, re-examined historical contributions to the 'wedge' and set out our latest assumptions for the long-run difference between the two measures.

Economy categories:
Inflation   

Cross-cutting categories:
Forecast process   

The indexation of excise and environmental duties in our forecast
Our forecasts for excise and environmental duties assume that rates are indexed in line with default parameters. These parameters are set by the Government and are detailed at each Budget in the Treasury’s Policy costings document. The assumptions represent a source of economy and
policy-related uncertainty in our forecast. In this box, we looked back at how a selection of duty rates moved over the Parliament relative to the default uprating assumptions assumed in the OBR’s first forecast in June 2010.

Fiscal categories:
Receipts    Vehicle excise duties    Environmental levies    Fuel duty   

Cross-cutting categories:
Forecast process   

Forecasting debt interest spending
Our March 2015 Economic and fiscal outlook forecast highlighted large changes in our debt interest forecast since previous fiscal events and the added complexity that debt interest was expressed net of the effect of gilts held by the Bank of England Asset Purchase Facility (APF) associated with past quantitative easing. This box described how we produced the debt interest forecast and illustrated some of the sensitivities to which it was subject.

Economy categories:
Interest rates   

Fiscal categories:
Public spending    Financial transactions    Network Rail    Public sector net debt    Public sector net borrowing    Debt interest spending    Asset Purchase Facility   

Cross-cutting categories:
Forecast process    Pensions   

The evolution of population projections since 1955
Population projections are subject to significant uncertainty, particularly over very long time horizons. This box outlined the error in successive population projections and the sources of error.

Economy categories:
Labour market    Population and migration   

Cross-cutting categories:
Forecast process    Demographics   

In recent years, the government consumption deflator had been weaker than we expected. This box set out our assumption that the weakness of the government consumption deflator was likely to persist over the forecast period. The box also reviewed the outlook for the household consumption deflator and explained our assumption that this would be broadly equal to CPI inflation in the long run. Taken together with our assumptions for other deflators, these assumptions implied a medium-term GDP deflator growth assumption of 2 per cent, revised down from a previous assumption of 2.5 per cent

Economy categories:
Inflation    GDP deflator   

Cross-cutting categories:
Forecast process   

The OBR provides independent scrutiny of policy costings and determines any resultant impact on the economic forecast. An estimate of the impact of a policy measure is included in the public finances forecast only when a firm policy has been announced and there is sufficient detail to quantify the effect of the policy. This box summarised the policies that were included in our November 2010 forecast.

Fiscal categories:
Receipts    Public spending   

Cross-cutting categories:
Forecast process