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Box sets » Economic and fiscal outlook » December 2012

  • Economic and fiscal outlook - December 2012 | Box: 4.1 | Page: 109

    Reclassification of Bradford & Bingley plc and Northern Rock

    During the financial crisis, both Bradford & Bingley (B&B) and Northern Rock (Asset Management) (NRAM) were transferred to public ownership. The ONS has announced that it will reclassify both bodies into the central government sector. This box outlined the impact of the reclassification on our fiscal forecast.

    Fiscal categories: Public sector net borrowing, Public sector net debt

    Cross-cutting categories: Classification changes, Data revisions, Financial interventions, Financial sector

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  • Economic and fiscal outlook - December 2012 | Box: 4.2 | Page: 141

    Switches between DEL and AME affecting local authorities

    In this forecast there were two policy switches that shifted spending between RDEL and AME, which applied from 2013-14 onwards. These policies were for the 50 per cent retention of business rates for local authorities in England, and for localised council tax reduction schemes. This box outlined these changes and examined the subsequent impact these would have on our forecasts.

    Fiscal categories: DEL and AME switches, Locally financed expenditure, Public spending

    Cross-cutting categories: Classification changes, Data revisions

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  • Economic and fiscal outlook - December 2012 | Box: 4.3 | Page: 145

    Universal credit

    In Chapter 4 of our December 2012 EFO, we discussed the fiscal outlook for 2012-13 to 2016-17. In this box, we discussed changes to the provisional universal credit forecast that was included in our March 2012 EFO. Changes to the forecast were due to a number of factors, including policies announced at Budget 2012 and finalisation of policy parameters in universal credit as well as .refinements to the methodology and assumptions used to forecast universal credit. We also discussed the main uncertainties in the forecast, which largely related to the unpredictability given the scale of the policy. The analysis in this box has since been superseded by developments in the universal credit forecast, though many of the key uncertainties remain.

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

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  • Economic and fiscal outlook - December 2012 | Box: 4.4 | Page: 162

    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 December 2012.

    Cross-cutting categories: Financial interventions, Financial sector

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  • Economic and fiscal outlook - December 2012 | Box: 3.7 | Page: 79

    ONS methodological developments on consumer prices

    In 2012 the ONS carried out a range of methodological development work relating to consumer prices indices. This box summarised some of the key elements, including work addressing the 'formula effect' which had made an increasing contribution to the CPI-RPI 'wedge' in 2010 and 2011. This box also discussed ONS analysis and recommendations from Consumer Prices Advisory Committee on the appropriate measurement of owner occupiers’ housing (OOH) costs and their inclusion in a new index of consumer prices.

    Economy categories: Inflation

    Cross-cutting categories: Data revisions, Experimental statistics

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  • Economic and fiscal outlook - December 2012 | Box: 3.8 | Page: 81

    Long run assumptions for National Account deflators

    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: GDP deflator, Inflation

    Cross-cutting categories: Forecast process

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  • Economic and fiscal outlook - December 2012 | Box: 3.9 | Page: 84

    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: Average earnings, Employment and unemployment, GDP by income, General government employment, Labour market

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  • Economic and fiscal outlook - December 2012 | Box: 2.2 | Page: 27

    The performance of past OBR economic and fiscal forecasts

    In October 2011, we published our first Forecast evaluation report (FER). This box summarised the key findings, including a discussion of weaker than expected GDP growth and why, despite this, public sector borrowing has fallen broadly as we expected it would.

    Economy categories: Employment and unemployment, Inflation, Labour market, Real GDP

    Fiscal categories: Public sector net borrowing

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  • Economic and fiscal outlook - December 2012 | Box: 3.1 | Page: 39

    Production function approach

    Our latest estimates of the output gap - which extended up to the third quarter of 2012 - implied a narrowing of the output gap since our previous forecast, despite actual output having remained broadly flat. Given the strength in the labour market over the period suggested a sharp fall in trend total factor productivity (TFP). This box set out the methodology behind that assessment, based on a production function approach that allowed us to separate out productivity growth into contributions from capital deepening and TFP.

    Economy categories: Output gap, Potential output

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  • Economic and fiscal outlook - December 2012 | Box: 3.2 | Page: 43

    The productivity puzzle

    Productivity growth since the late-2000s recession has been relatively weak. This box set out some proposed explanations for that weakness, including measurement issues, lower investment, compositional effects, labour market factors and impaired financial markets. Most commentators believed that some combination of these factors was likely to be responsible. The relative importance of these factors also has implications for the extent to which the shortfall was believed to be demand or supply-related.

    Economy categories: Employment and unemployment, Labour market, Productivity

    Cross-cutting categories: Financial sector

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