Following the cancellation of our 2016 Fiscal sustainability report we have published three Fiscal sustainability analytical papers today. They cover: the public sector balance sheet; the longer-term effects of student loan policy announcements over the past year; and how changes in mortality rate assumptions in the latest population projections would affect state pensions spending.
These analyses do not contain any judgements about short- or medium-term implications of the referendum result, which we will consider as we prepare our next forecast in the autumn.
Public sector balance sheet
This paper assesses the National Accounts and 2014-15 Whole of Government Accounts measures of the UK’s public sector balance sheet. In the National Accounts, the reclassification of Housing Associations into the public sector has pushed public sector net debt (PSND) noticeably higher as a share of GDP. In the WGA, a lower discount rate has pushed up the measured net public service pension liability and the value of student loans assets, while helping to reduce the ‘RAB charge’. But this does not signal a meaningful change in long-term fiscal sustainability. The lower discount rate is also pushing up the provision for nuclear decommissioning, although here there is also a genuine further increase in expected costs.
This paper updates the long-term projections for the addition to public sector net debt from student loans published in our 2015 FSR. It shows that student loans are now expected to add 10.4 per cent of GDP to net debt in 50 years’ time, up 2.8 per cent of GDP since last year. The increase largely reflects a series of policy changes announced by the Government in recent fiscal events, including the conversion of maintenance grants to loans for students from lower-income households and replacing bursaries with loans for nurses and others studying certain health-related courses.
Population projections and pensions spending
This paper describes the latest ONS population projections and their implications for the State Pension age (SPA) and pensions spending. Counter-intuitively, the fall in life expectancy in the latest projections increases spending over the 50-year projection horizon, because our estimate of the impact of the Government’s decision to link the State Pension Age to life expectancy increases spending (by slowing the pace of SPA rises) by more than the increase in mortality directly reduces it. But over the very long term the slower pace of SPA increases only offsets a third of the direct effect.
Since the publication of our March 2016 Economic and fiscal outlook (EFO) we have received a request to publish further detail of our universal credit caseload forecasts. We have published this new supplementary forecast information on the main EFO page of our website.
Monthly commentary on the public finances – afternoon
Public finances data for June 2016 will be published by the ONS and HM Treasury tomorrow, 21 July 2016, at 9:30am. Our regular monthly commentary will be published by early afternoon. It is worth noting that most of the period covered by these data preceded the EU referendum.
Supplementary release – 11am
Since the publication of our March 2016 Economic and fiscal outlook (EFO) we have received a request to publish further detail of our universal credit caseload forecasts. We will publish this new supplementary forecast information tomorrow on the main EFO page of our website.
Fiscal sustainability analytical papers – 2pm
As indicated in our statement following the EU referendum, we plan to publish some of the analysis that would have featured in our 2016 Fiscal sustainability report, where the conclusions were less sensitive to assumptions that might be affected by the referendum result. We will publish three Fiscal sustainability analytical papers tomorrow at 2pm. They will cover: the public sector balance sheet; the longer-term effects of student loan policy announcements over the past year; and how the latest population projections would affect state pensions spending.
Our Annual report and accounts detail our budget and finances for for 2015-16, audited by the National Audit Office. It also sets out our achievements, details of our staffing structure, operations and our most recent budget settlement, which reflects the recommendations of the 2015 HM Treasury Review of the OBR.
Despite a weaker outlook for the economy and tax revenues, the Chancellor has announced a net tax cut and new spending commitments. But he remains on course for a £10 billion surplus in 2019-20, by rescheduling capital investment, promising other cuts in public services spending and shifting a one-off boost to corporation tax receipts into that year.
Robert Chote distils the key messages from our latest Economic and fiscal outlook – in his press conference presentation and accompanying speaking note.
Robert Chote has written to the Work and Pensions Select Committee in reply to a letter from the Chair. The Committee requested further information on the process of certification of Universal Credit policy costings and clarification of details of the savings associated with changing the assumed rollout profile of the policy.
Working paper No. 8: Anti-avoidance costings: an evaluation, looks back at the costings of recently announced anti-avoidance measures to assess their performance against the original costing. It finds that whilst a large number of measures perform close to expectations, there are on average more under-performing measures than over-performing ones.
Since the publication of our November 2015 Economic and fiscal outlook (EFO) we received a request to publish our estimate of the number of employees that will be paid the National Living Wage and the gender breakdown. We have published this new supplementary forecast information today, 22 January 2016, on the main EFO page on our website.
Robert Chote gave evidence to the Scottish Parliament’s Finance Committee on 6 January. He noted that the improvement in the underlying fiscal forecast in November’s Autumn Statement was small by the standards of most recent autumn forecasts and could easily be reversed.