Costings capture the direct effects of policy measures on our fiscal forecast, but policies can also have ‘indirect effects’ if they affect our economy forecast. Each Economic and fiscal outlook therefore normally includes a box in our economy chapter which explains how changes to fiscal policy have affected our economy forecast, thereby generating these indirect effects – for instance, by affecting our forecast for aggregate demand via fiscal multipliers. Fiscal policy can also affect our forecasts for potential output, as we explained in Briefing paper No.8: Forecasting potential output – the supply side of the economy.
Our Autumn Statement 2023 economy forecast, as described in Chapter 2 of our Economic and fiscal outlook, incorporated the impact of the Chancellor’s policies. As usual, we summarised these effects in Box 2.1 on the economic impact of policy measures and also provided an assessment of recent business tax policy measures in Box 2.4. Since then we have published two articles with further details of the macroeconomic impacts of two of the policy measures announced in that fiscal event: the cuts to National Insurance Contributions and the policy to enable full expensing of all qualifying plant and machinery investments.