Box sets » Economic and fiscal outlook - November 2016
In our November 2016 forecast, our first following the June 2016 referendum, we revised down our potential growth forecast, primarily reflecting the effect of weaker business investment on productivity growth. To give some context to our central forecast judgements, this box outlined a number of channels through which the decision to leave the EU could affect potential output and the uncertainty associated with estimating these effects.
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 2016 Economic and Fiscal Outlook, economy forecast adjustments included the effects of looser fiscal policy on GDP and the effects of tax policy changes on inflation.
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.
Following the June 2016 referendum result, we made a number of broad assumptions about the likely impact on trade, based on the average effects estimated in external studies. Given the importance of these assumptions, we looked at some past trends in this area, including the geographic composition and the relative importance of goods and services trade. We also set out some of the drivers of changes in exports as a share of GDP since 1999 and discussed the possible effects of trade on UK businesses and households.
Our PAYE, SA, NICs and corporation tax (CT) forecasts are affected by our assumption that incorporations will continue their rising trend. This box covered historical estimates, the modelling of the receipts effects from incorporations and the implications for the forecast.
The ONS announced that it would implement a new accruals methodology for corporation tax (CT) early in 2017. This box outlined in detail the changes to the ONS methodology.
Our fuel duty receipts forecast combines our underlying forecast assumptions about the amount of fuel that will be purchased and the Government’s stated policies on the fuel duty rates that will be levied on those purchases. This box outlined the changes in fuel duty and policy assumptions since 2010.
The UK currently makes a substantial net financial contribution to the activities of the European Union. This box outlined the historical liabilities and other commitments entered into that officials, institutions and MEPs were said to be arguing that the UK should pay a share of, in light of Brexit. The box also listed government policy commitments to fund spending in certain areas where EU funding would be withdrawn.
Ahead of the Chancellor’s Autumn Statement and our November 2016 Economic and fiscal outlook, the Institute for Fiscal Studies published an assessment of the outlook for the public finances. In this box, we described the differences between our new pre-measures forecast and that assessment.