The key chart
The key message
The Office of Budget Responsibility (OBR) will publish its latest “Economic and fiscal outlook” tomorrow (Wednesday 23 March 2022) following the Chancellor’s Spring Statement in Parliament.
The outlook will present the OBR’s latest forecasts for the economy and public finances. The context remains one in which the Chancellor, Rishi Sunak, has pledged to restore order to the government finances after borrowing increased during the pandemic.
“The ongoing uncertainty caused by global shocks means it’s more important than ever to take a responsible approach to the public finances.”
Rishi Sunak quoted by Bloomberg (22 March 2022)
There are three key things to bear in mind when analysing these latest forecasts tomorrow:
- First, the UK government’s response to the COVID-19 pandemic was both timely and appropriate (see “Extraordinary response to extraordinary times“)
- Second, responsible fiscal outcomes are those that deliver a balanced economy not a balanced budget (see “Note to Rishi“)
- Third, previous OBR forecasts for improvements in UK government finances (see key chart above) relied on unsustainable assumptions including sustained, twin domestic deficits counterbalanced by significant and persistent current account deficits (see “A return to abnormality“)
Rather than sending a message of fiscal responsibility, such assumptions smell more of “reverse engineering.” As always, one chart among the 200+ pages, will tell us all we need to know tomorrow…