Economic and fiscal outlook – March 2013

This is the Office for Budget Responsibility’s latest Economic and fiscal outlook published on March 20th 2013. It sets out forecasts for the economy and the public finances, and an assessment of whether the Government is likely to achieve its fiscal mandate and supplementary target.

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Economic and fiscal outlook - March 2013

March 20, 2013 – 2.41 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.

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 2013 Economic and Fiscal Outlook, we made adjustments to our forecasts of real GDP, business investment and inflation

Economy categories: Residential investment, Housing market, Property transactions, GDP by expenditure, Inflation, Business investment

Fiscal categories: Receipts, National Insurance Contributions, Income tax, Public spending, Corporation tax, Departmental spending

Is it plausible to assume a negative output gap after five years?

In early OBR forecasts we estimated a significant negative output gap following the late-2000s recession, which we did not expect to have closed by the end of the forecast horizon. Our March 2013 forecast implied that potential output would be 14.6 per cent below an extrapolation of its pre-crisis trend after five years, with actual output a further 2.3 per cent below that. This box examined the implications of that forecast, as well as the fiscal implications of some possible alternative assumptions.

Economy categories: Potential output, Output gap

Fiscal categories: Structural deficit

Household saving and balance sheets

Household saving and balance sheets
The household saving ratio continued to rise in 2012. This box explored the possible reasons for this, considering evidence from the latest available NMG household survey. The box also discussed the implications for household balance sheets, noting that in aggregate households appeared to have used higher saving to finance accumulation of more financial assets, rather than paying down debt.

Economy categories: Household disposable income, Household balance sheet, Household saving ratio, GDP by income

UK export markets

UK export markets
Exports fell during 2012, partly reflecting lower growth in UK export markets and a rise in sterling, although part of that fall was unexplained. This box looked at some past trends in the composition of exports to offer some explanation for that weakness, highlighting in particular the fall in financial services exports, and compared this against trends seen in the US.

Economy categories: Net trade, GDP by expenditure

Cross-cutting categories: Financial sector

General government employment

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

Universal credit

Universal credit
In Chapter 4 of our March 2013 EFO, we discussed the fiscal outlook for 2013-14 to 2017-18. In this box, we introduced a new marginal cost presentation of the universal credit forecast and also outlined contributing factors to changes in the forecast. These factors included policies announced at the 2012 Autumn Statement and changes to a number of the universal credit policy parameters as well as refinements to the methodology and assumptions used to forecast universal credit. The analysis in this box has since been superseded by developments in the universal credit forecast.

Fiscal categories: Public spending, Welfare spending, Housing benefit, Universal credit, Unemployment benefits

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 2013.

Cross-cutting categories: Financial sector, Financial interventions

Use of Whole of Government Accounts

The Whole of Government Accounts (WGA) contains information on future fiscal liabilities that are relevant for our forecast. This box explained how we ensured that those future liabilities reported in the WGA were fully reflected in our forecasts, where those liabilities were expected to affect the public finances.

Fiscal categories: Oil and gas revenues, Public service pension payments, Whole of Government Accounts and National accounts, Public spending, Receipts

Cross-cutting categories: Pensions