In each Economic and fiscal outlook we publish a box that summarises the effects of the Government’s new policy measures on our economy forecast. These include the overall effect of the package of measures and any specific effects of individual measures that we deem to be sufficiently material to have wider indirect effects on the economy. In our November 2016 Economic and Fiscal Outlook, economy forecast adjustments included the effects of looser fiscal policy on GDP and the effects of tax policy changes on inflation.

This box considers the possible effects on the economy of the policy measures announced in this Autumn Statement. More details of each measure are set out in the Treasury’s documents. Our assessment of their fiscal implications can be found in Chapter 4 and Annex A.

The Government has loosened fiscal policy between 2017-18 and 2020-21, largely reflecting increases in departmental current and capital spending. To reflect these changes in our economy forecast we have applied the same ‘multipliers’ we have used in previous forecasts. These are larger the shorter the period between a policy being announced and implemented. The multipliers applied to specific fiscal years are weighted to reflect the fact that these changes are being announced two-thirds of the way through 2016-17. They imply small effects on the profile of real GDP growth, adding 0.1 percentage points in 2017-18 and subtracting less than 0.1 percentage points a year thereafter.

The Autumn Statement includes a number of policies that are likely to affect housebuilding and residential investment. Dropping the requirement for housing associations to move to a shared-ownership model and abandoning plans to force higher rents on some tenants will both reduce the cash inflows available for housebuilding. Partly offsetting that, additional grant funding and other smaller measures will increase cash inflows and boost housebuilding. The net effect is to reduce cumulative housebuilding by housing associations by around 13,000 over the forecast period, with a boost next year becoming a drag by 2019-20. Our housing associations forecast is set out in Chapter 4.

The Government has also announced additional funding to bring forward the construction of homes on surplus public sector land. While it is unclear whether this measure will result in additional housebuilding in the long term, we expect it to bring around 10,000 units forward into the forecast period. Taken together with the effect on housing associations, the overall effect is small, reducing residential investment growth by an average of 0.2 percentage points a year.

The Government has announced a number of policies that we expect to affect inflation. The latest freeze in fuel duty takes effect in April 2017, while the latest rise in insurance premium tax from 10 to 12 per cent takes effect in June 2017. These have small and partly offsetting effects, reducing CPI inflation by less than 0.1 percentage points in 2017-18.

The Government has also announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast. Nevertheless it is possible that a ban on fees would be passed through to higher private rents. If this is the case, it would also affect measured inflation, as CPI and RPI inflation both include rents but do not include the additional fees charged by letting agents. We will return to the implications of this policy for inflation once firm details are available.

This box was originally published in Economic and fiscal outlook – November 2016

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