Forecast process and papers

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The forecast process

As soon as the Chancellor of the Exchequer sits down after delivering their Budget or Statement to Parliament, the OBR publishes a forecast for the economy and the public finances that incorporates the impact of the policy decisions that the Chancellor has just announced. This appears in our Economic and fiscal outlook (EFO) publication alongside supplementary commentary and analysis.

The publication of the EFO marks the culmination of a lengthy process of forecast preparation and policy scrutiny in the run-up to the Budget or Statement. The main steps are as follows:

  • The Charter for Budget Responsibility requires the Chancellor, under normal circumstances, to give the OBR at least ten weeks’ notice of a fiscal event and formally commission a forecast. It is up to the Chancellor to decide on the date. Once the date is set, the signatories of the Memorandum of Understanding (OBR, HM Treasury, HM Revenue and Customs, and the Department for Work and Pensions) agree a timetable. This sets out the processes for exchanging the information necessary for the OBR to produce its economic and fiscal forecasts and for the Treasury to produce its ‘scorecard’ of costings of the Chancellor’s policy measures. The timetable is published on our website once it has been agreed.
  • The OBR begins by preparing a first-round ‘pre-measures’ economic forecast, drawing on data released, and analysis produced, since the previous forecast. Using determinants derived from this forecast (such as the outlook for wages, profits, consumer spending, unemployment and inflation), the OBR then commissions forecasts for each individual tax and spending stream from HM Revenue and Customs, the Department for Work and Pensions and other government departments and agencies. We then collate these individual forecasts and use them to generate aggregate forecasts for spending and receipts, and for the various measures of public sector borrowing and debt.
  • The results of the first-round economic and fiscal forecasts are then sent to the Chancellor, typically around six weeks before the statement. This will include our initial central assessment of the margin by which we believe the Government will hit or miss its fiscal targets in the absence of new policy measures.
  • The pre-measures economic and fiscal forecast then undergoes up to two further iterations, each incorporating new data plus further judgements on the outlook for the economy and on the detail of the tax and revenue forecasts. The experts in HMRC, DWP and the other departments provide very useful advice on the various forecast elements, but the ultimate judgements on how to interpret recent outturn data and which assumptions and models to use are taken by the OBR’s Budget Responsibility Committee.
  • The Chancellor typically receives the final, pre-measures fiscal forecast around two-to-three weeks before the statement. Our Memorandum of Understanding states that there should be no more than 21 working days between our final pre-measures forecast and a fiscal event, except in exceptional circumstances. This means in practice that no further economic outturn data is taken on after the final pre-measures economy forecast, and no further fiscal outturn data after the delivery of the final pre-measures forecast. This provides a stable base from which the Chancellor can take their final policy decisions, knowing what they need to do to meet or miss their formal fiscal targets or other objectives with whatever margin they deem appropriate.
  • At the same time as working on the pre-measures forecasts, the OBR scrutinises the tax and welfare spending measures that the Chancellor is considering for the Statement or Budget. First, the Treasury shows us a draft ‘scorecard’ – an initial list of possible measures. We then discuss the scrutiny we think each measure would require with the Treasury and the responsible department, based on its complexity and similarity to previous measures. The department will then send a ‘costing note’ to the OBR, setting out the details of the policy and estimating the amount of money it will raise or cost in each year of the forecast. The OBR discusses the analysis with the department and the Treasury, suggesting changes and iterating until we are happy to endorse the estimates as ‘reasonable and central’ or until – very occasionally – the Treasury and we agree to disagree. In the case of tax measures, these discussions focus on identifying the relevant tax base and judging the potential behavioural impact of the measure from the experience of similar measures or from estimates of relevant elasticities.
  • The OBR does not generally scrutinise the spending of individual Whitehall departments on public services and capital investment. Instead, it takes a judgement on the extent to which departments in aggregate will over or under spend the Resource and Capital Departmental Expenditure Limits (RDELs and CDELs) set for them by the Treasury. For those years of the forecast for which detailed departmental spending plans have not yet been announced (i.e. those beyond the horizon of the most recent Spending Review), we ask the Treasury what aggregate DEL numbers they wish us to assume.
  • At the outset of the forecast process, the OBR and the Treasury agree deadlines by which the OBR must be told of a proposed policy measure if it is to guarantee: first, to include its impact in the final post-measures economic forecast, and; second, to reach a judgement on the scorecard costing. There is an interim deadline for notification of more significant policy measures, which enables the OBR to produce a ‘ready reckoned’ post-measures forecast to indicate to HM Treasury and the Chancellor the aggregate effects of their measures on our forecasts before the final deadline. The final deadline to notify us of potentially ‘economy-moving’ measures is typically just over a week before the fiscal event. A subsequent deadline is in place to notify the OBR of all other measures.
  • Once the OBR has been notified of all the measures, we prepare our final economic and fiscal forecasts for publication, by amending the final pre-measures forecast to reflect the economic and fiscal impact these measures. The final scorecard can look very different from the first draft – some measures drop off as the statement draws closer, while others are added on. In very exceptional circumstances, the OBR may take on updated market assumptions and outturn data in the final round, such as in March 2022 when Russia’s invasion of Ukraine caused large movements in asset prices. On completion of this post-measures round and in the absence of exceptional circumstances, the OBR will release the market assumptions window via its Operations notice approximately one week prior to the fiscal event.
  • Even for measures that remain on the scorecard throughout, the precise details – the exact changes in tax allowances and rates, for example – may be refined during and after the scrutiny process. Minor changes can be incorporated into the forecast after the deadlines referred to above, with the OBR typically closing the final post-measures forecasts five days prior to the statement. This allows HM Treasury to fine tune the measures to achieve the ‘bottom line’ of net giveaways and takeaways that it wants in each year.
  • On the day of the Budget or Statement itself, we publish the final post-measures forecasts in the Economic and fiscal outlook, along with an explanation of the impact that the scorecard and other policy measures have had on the forecasts and on the Government’s performance against its fiscal targets. Separately, the Treasury publishes its final scorecard costings, alongside other documentation on the economy and its policy decisions. In the Policy measures chapter of the EFO, we explain whether we have been willing to certify each scorecard measure costing that the Treasury ultimately decides upon as reasonable and central (and, if not, what alternative costing we have included in our forecast). We also give each costing an uncertainty rating, based on the complexity of the modelling, the quality of the data and the nature of the assumed behavioural effects that underpin it. The Chancellor gives their own summary of our forecasts – and the impact that they have had on their policy decisions – when they make their statement to Parliament. We then hold a press conference to take people through the forecasts in detail and to answer any questions they may have.

Briefing papers

Briefing papers describe our work and explain the material we present.

Working papers

As part of the OBR work programme we will produce working papers on topics which will inform discussion on our forecasts.

Discussion and Occasional papers

The OBR publishes discussion papers to generate debate around key aspects of its work. Our occasional papers are publications that are not part of a wider set of releases.