The Office for Budget Responsibility was created in 2010 to provide independent and authoritative analysis of the UK’s public finances. It is one of a growing number of official independent fiscal watchdogs around the world.[amazon_link asins=’1292221569′ template=’ProductAd’ store=’britresources-21′ marketplace=’UK’ link_id=’7bab42b7-5124-4575-bfb0-a7dc94c1562e’]
We have five main roles:
We produce detailed five-year forecasts for the economy and public finances twice a year. The forecasts accompany the Budget Statement (usually in March) and the Autumn Statement (usually in late November). They incorporate the impact of any tax and spending measures announced in those statements by the Chancellor.
The details of the forecasts are set out in the Economic and fiscal outlook (EFO). Our annual Forecast evaluation report (FER), published each autumn, examines how they compare to subsequent outturns and draws lessons for future forecasts. For a description of the forecasting timeline, read about our forecast process on the forecast methodology page.
We use our public finance forecasts to judge the Government’s performance against its fiscal targets and target for welfare spending. In July 2015 the Government set itself two new medium-term fiscal targets: first, to achieve a budget surplus in 2019-20 and then maintain that surplus absent a marked slowdown in economic growth, and; second, to reduce public sector net debt as a share of GDP in each fiscal year from 2015-16 to 2019-20.
In each EFO, we assess whether it has a greater than 50 per cent chance of hitting these targets under current policy. Since March 2014, the government has also set a self-imposed cash limit on a subset of its social security and tax credit spending (the ‘welfare cap’). We make a formal assessment in the EFO of its adherence to the cap at the time of each Autumn Statement, but also forecast spending within the cap at each Budget.
Our annual Welfare trends report (WTR) examines the drivers of welfare spending, including both those elements inside and outside the cap.
We assess the long-term sustainability of the public finances: Our Fiscal sustainability report (FSR) sets out long-term projections for different categories of spending, revenue and financial transactions, and assesses whether they imply a sustainable path for public sector debt.
The FSR also analyses the public sector’s balance sheet, using both conventional National Accounts measures and the Whole of Government Accounts (WGA) prepared using commercial accounting principles. From 2016, the FSR will be published once every two years, reflecting the frequency with which the Office for National Statistics updates its population projections.
In addition to producing central forecasts and projections for the public finances, the EFO and FSR include discussion of the risks to those forecasts and projections (both upside and downside). The WGA also provides further information on specific fiscal risks, notably contingent liabilities (such as government guarantees), which we discuss in the FSR. From 2017 we will be producing a dedicated Fiscal risks report (FRR) once every two years, drawing together and expanding on this analysis.
We scrutinise the Government’s costing of individual tax and welfare spending measures at each Budget and Autumn Statement. The Government provides us with draft costings in the run-up to each statement and we subject these to detailed scrutiny and challenge.
We then state in Annex A of each EFO and in the Treasury’s policy costings document whether we endorse the costings that the Government finally publishes as reasonable central estimates and whether we have used them in our forecasts. We also give each costing an uncertainty rating, based on the data underpinning it, the complexity of the modelling involved and the possible behavioural impact of the policy.
Taken from the OBR website.
