The key chart (from November 2020)
The key message
The Office for Budget Responsibility (OBR) will publish its latest forecasts in their “Economic and fiscal outlook – March 2021”, alongside the Chancellor’s budget tomorrow (3 March 2021)
The report is typically over 200 pages long and contains much detailed work, analysis and scenario planning. Very helpfully, it also includes one page (typically around page 65/66) that gives the reader immediate insights into the reliance and/or confidence that can be placed on the rest of the forecasts. The page is headed, “sectoral net lending” and, as the name suggests, links directly to CMMP’s preferred financial sector balances framework.
In November last year, this page illustrated clearly the risks to the rest of the OBR’s forecasts for UK growth and for the level of government borrowing. First, they assumed unprecedented levels of dynamism from both the UK household and corporate sectors and behavioural trends from these sectors and from the RoW that contrasted sharply with those seen after the GFC. Second, while they claimed that “sectoral net lending positions return to more usual levels,” this did not make them sustainable.
It is unusual, but equally very helpful, that one page can tell us so much about the truth behind the headlines that will dominate tomorrow’s news and Thursday’s papers…