New OBR figures lay bare the challenge facing Brexit Britainby George Magnus / October 10, 2017 / Leave a comment
Theresa May’s government is creating enough of its own bad news without any help from the Office for Budget Responsibility (OBR), created in 2010 to provide independent and authoritative analysis of the UK’s public finances. Yet in today’s “Forecast Evaluation Report,” the OBR has pretty much holed the Treasury and the government below the water line at a crucial time in the Brexit negotiations, and just weeks before the Budget.
For the last seven years, the OBR has continuously assumed that the UK’s disappointing productivity (output per hour worked) performance would revert to a pre-financial crisis trend of 2 per cent per annum over the medium-term. Ever hopeful, it anticipated that a rise of 1.5 per cent in 2016 heralded just such an outcome, but this proved to be a false dawn, and now the OBR has thrown in the towel. In its report, it says
“…it seems less plausible to assume that the factors holding back productivity growth will fade substantially over the forecast period. In light of this, we expect to revise down our assumption for average potential productivity growth significantly in our November forecast.”
We don’t know how much “significantly” will be, but this is not an area in which we wanted to hear bad news, for UK productivity has long been disappointing. According to data previously published by the ONS, it has hardly grown since 2014, and is barely higher than in 2010. In 2016, productivity levels were higher…