As usual, we’ve toiled through the Office for Budget Responsibility’s Economic and Fiscal Outlook document so that you don’t have to. Here are six of its best:
1. THE GROWTH CHART
Every single forecast for GDP growth has been downgraded in this Budget, with the worst affected being that for this year. But more significant than the actual numbers are the reasons behind them. Sure, factors outside our borders are at play – China’s slowdown, instability in the Middle East, etc. – but some of the problems are peculiarly British. The OBR seems particularly concerned by the productivity of our workforce, which (as per the graph on page 5 of their report) has also been revised downwards. They add: “This in turn has prompted us to revise down our GDP growth forecasts by around 0.3 percentage points a year to an average of 2.1 per cent a year over the rest of the decade.” The great conundrum persists.
Woah, what’s this?! Glide quickly over the OBR’s borrowing forecasts for the next few years, until you reach the one for 2018-19. It’s not just higher than what was expected at the time of the Autumn Statement, it’s five times higher – £21.4 billion instead of £4.6 billion. We’re meant to believe that this deficit will be eradicated, and then some, by the following year, which would satisfy Osborne’s “fiscal mandate” of reaching a surplus by 2019-20. But really? The Chancellor will implement the necessary spending cuts and tax rises in the year before an election? Perhaps he’s hoping for some sort of windfall before then, so that he doesn’t have to do anything.
3. THE DEBT GRAPH
Osborne’s supplementary target is to have our national debt falling as a share of GDP in each year to 2019-20. The OBR, in their last set of forecasts, expected him to pull this off. Now, in today’s set of forecasts, they don’t. The debt is forecast to rise from 83.3 per cent of GDP in 2014-15 to 83.7 per cent in 2015-16, before declining in every subsequent year. This is an embarrassment for the Chancellor, who has now broken two of the three rules that he set himself (more on the other one below), but it’s unlikely to do him much political harm by itself. Rules were broken during the last Parliament, and still Osborne was regarded as more credible than what Labour had to offer.
4. THE DEBT CHART
Expressing the national debt as a percentage of GDP can obscure an important detail: the actual size of the national debt. That why I like to include this scary chart of the debt in cash terms. You’ll notice that it keeps on rising. It’s now forecast to reach £1.74 trillion – yes, trillion – in 2020-21.
5. THE WELFARE CAP
The third of Osborne’s fiscal rules is the welfare cap. I’ve explained how this works in one of my To The Point posts, so suffice to say: the Chancellor is still breaching it. As the OBR puts it, “A fresh upward revision to the cost of disability benefits (only partly offset by tighter eligibility criteria announced shortly prior to the Budget) means that our forecast of spending subject to the welfare cap continues to exceed the permitted amount in every year, and by a larger margin than in November.”
6. THE EMPLOYMENT GRAPH
At last, some solace. But is it really? The number of employed people may continue rising until it surpasses the 32 million mark, yet the OBR’s heightened concerns about productivity might cause us to ask: what is the quality of these jobs? What are they adding to our economy? Even those who believe, like me, that work is a good thing must wrestle with these questions.