Economic and fiscal outlook – March 2012

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Economic and fiscal outlook - March 2012

March 21, 2012 – 2 MB

Supporting documents

Supplementary documents

Information or data which has been released as a result of external requests, since the original publication of the main document.

Presentations

Boxes

Within each of our key publications we include topical ‘boxes’. These self-contained analyses are unique to this publication and tend to cover recent developments in the economy or public finances that complement the main discussion of our analyses.

Rewriting history: real GDP growth in 2010

Rewriting history: real GDP growth in 2010
Both forecasts and National Accounts data are subject to revision. This box discussed how outside forecasts for growth in 2010 evolved through that year and compared these forecasts with ONS outturns, from the ONS' first estimate made in January 2011 through to their latest available estimate in February 2012.

Economy categories: Economic data revisions, Real GDP

Cross-cutting categories: External forecasts, Data revisions

The economic effects of policy measures

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 2012 Economic and Fiscal Outlook, we made adjustments to our forecasts of real GDP, business investment and inflation.

Economy categories: GDP by expenditure, Inflation, Business investment, GDP by income, Labour market, Household disposable income

Fiscal categories: Income tax, Public spending, Corporation tax, Receipts, Welfare spending, VAT

Cross-cutting categories: Financial sector

Central bank operations and the credit outlook

Central bank operations and the credit outlook
Central banks around the world launched two significant new market operations at the end of 2011. This included a program to provide liquidity support to the global financial system, as well as longer-term refinancing operations by the ECB. This box analysed the impact of these operations on the UK financial sector by looking at net capital issuance and five-year credit default swap (CDS) premia of UK banks. In light of these developments, we made adjustments to our forecast of CDS premia in our March 2012 forecast.

Economy categories: Sector net lending

Cross-cutting categories: Financial sector, Monetary policy

Will household deleveraging act as a drag on growth?

Will household deleveraging act as a drag on growth?
The path of the household debt-to income ratio since the crisis had led outside commentators to conclude that household deleveraging had further to run in the UK than the in the US. This box discussed some of the limitations of debt-to-income as a measure of leverage. An alternative measure is the debt to equity ratio - which takes into account both household assets and liabilities - which indicated that household leverage had fallen more slowly in the US than in the UK since the crisis.

Economy categories: Real GDP, Household balance sheet

Turnover in the housing market

Turnover in the housing market
Residential property transactions fell sharply in 2008 as the availability of mortgage finance fell and stricter credit standards were introduced. This box explored recent trends in transactions and discussed our medium-term forecast, which is determined by our projection of average rate of turnover in the housing market. In our March 2012 forecast we expected the level of transactions to remain around 20 per cent below the pre-crisis peak by the end of the forecast period.

Economy categories: Property transactions, Housing market

General government employment

Our general government employment (GGE) forecast is based on projections of the growth of the total government paybill and paybill per head, which is in turn based on the Government's latest spending plans. In this box we compared our GGE forecast against the outturn data since the start of the 2010 Spending Review period. This allowed some assessment of how public sector employers were progressing with their intended workforce reduction and how much adjustment would still be required.

Economy categories: Labour market, Employment and unemployment, General government employment

Implications of transferring the historic deficit of Royal Mail’s pension fund to the public sector

Implications of transferring the historic deficit of Royal Mail’s pension fund to the public sector
The Government announced that it intends to take on Royal Mail’s historic pension deficit with effect from April 2012. This box explored how the transfer of the relevant assets and liabilities will impact the public sector finances.

Fiscal categories: Public spending, Current government net cash requirement, Financial transactions, Public sector net debt, Public sector net borrowing, Royal Mail, Public service pension payments

Cross-cutting categories: Pensions

The additional rate of income tax

The additional rate of income tax
An additional rate of income tax of 50 per cent for incomes over £150,000 was introduced in April 2010. Budget 2012 announced that this rate would be reduced to 45 per cent from April 2013. This box set out how the Budget 2012 measure was costed, in particular the assumptions we made around behavioural responses and income shifting. Box 3.2 of our 2014 Forecast evaluation report reviewed this costing in detail.

Fiscal categories: Receipts, Income tax, Tax avoidance

Cross-cutting categories: Forestalling

Fiscal impact of the financial interventions

The Government undertook a number of interventions in the financial sector in response to the financial crisis and subsequent recession of the late 2000s. This box provided an update of the estimated net effect of them on the public finances as of March 2012.

Cross-cutting categories: Financial sector, Financial interventions

PSNB fan charts

PSNB fan charts
This box set out the methodology behind our PSNB fan charts. Briefing paper no.4: 'How we present uncertainty' sets out this methodology in more detail.

Fiscal categories: Public sector net borrowing, Structural deficit