The stakes for George Osborne as he prepares to deliver his third Autumn Statement this week couldn’t be higher. With growth faltering, public borrowing above target, and the Chancellor’s economic plan under attack from all sides, the Office for Budget Responsibility’s (OBR’s) verdict on the public finances will be a crucial determinant of future Government economic policy.
The SMF’s recent work speaks to a number of the questions likely to be raised by the Autumn Statement. Our study Fiscal Fallout uses the OBR’s own models to estimate the size of the output gap, on which much of the OBR’s advice is based. Our earlier publication, Osborne’s Choice, outlines how the Chancellor can create a potent growth strategy within the existing deficit reduction plan by changing the composition of cuts.
Based on the analysis in these two studies, this short briefing explores:
- What the OBR may say about the size of the structural deficit;
- the consequences for the public finances of the OBR’s likely assessment;
- how the OBR’s main model for judging the state of the public finances differs from those of other forecasters and what the consequences of this are; and
- how the Chancellor can use fiscal policy to boost growth while sticking to his deficit reduction plan.