This checklist helps clients keep track of the key economic and public finances forecasts announced during the Chancellor’s Budget speech at 12.30pm on Wednesday 11th March and to provide some instant context.
- This checklist helps clients keep track of the key economic and public finances forecasts announced during the Chancellor’s Budget speech at 12.30pm on Wednesday 11th March and to provide some instant context. We will send a Rapid Response and a Focus after the speech.
Possible New Measures for 2020/21 | |||
Tax Rises | Yield | Spending Rises | Cost |
Cancel corporation tax cut | £3.0bn | Additional investment spending | £12.5bn |
Abolish “red diesel” subsidy | £2.4bn | Targeted measures to tackle coronavirus | £5.0bn |
Abolish entrepreneurs’ capital gains tax relief | £2.3bn | Spending on NHS | £1.2bn |
Immigration health surcharge | £0.3bn | Extra flood defences | £0.5bn |
Rise in Vehicle Excise Duty | £0.2bn | ||
Main pre-announced measures due to come into effect in 2020/21 | |||
Tax Rises | Yield | Tax Cuts | Cost |
Freeze income tax personal allowance, higher-rate, inheritance tax and VAT thresholds. | £1.7bn | Increase employee & self-employed NICs threshold to £9,500 | £2.0bn |
Make larger private-sector firms responsible for determining if contractors are “employed”. | £0.7bn | Expand temporary business rates discount for small retailers | £0.3bn |
Introduce digital services tax. | £0.4bn | ||
Restrict NI employment allowance to employers with NICs bill of less than £100k. | £0.3bn |
Economic & Fiscal Forecasts | Comments | ||||||
GDP Growth (%) | 2019 | 2020 | 2021 | 2022 | 2023 | Having finalised its economic and fiscal forecasts a few weeks ago, the OBR is unlikely to have factored in any hit to economy activity from the coronavirus outbreak in the UK. Even so, due to the recent weakness in productivity growth, we expect the OBR to revise down its forecast for GDP growth this year and in all future years of its forecast. | |
Budget 2020 | ___ | ___ | ___ | ___ | ___ | ||
OBR Mar. 20 (CE est.)* | – | 0.9 | 1.4 | 1.5 | 1.5 | ||
OBR Mar. 19 | – | 1.4 | 1.6 | 1.6 | 1.6 | ||
Bank of England (Feb.) | – | 0.8 | 1.4 | 1.7 | – | ||
Consensus | – | 1.0 | 1.5 | 1.7 | 1.8 | ||
Capital Economics*** | – | 0.7 | 2.0 | 1.6 | 1.5 | ||
Current Budget Surplus (+) Deficit (-) (£bn) | 19/20 | 20/21 | 21/22 | 22/23 | 23/24 | We think that the OBR will add around £24bn to its estimate of the “current” budget deficit (i.e. excluding investment) in 2022/23. That would mean that the £18.6bn surplus for 2022/23 predicted in the OBR’s restated March 2019 forecast would become a £5.1bn deficit. That would breach the balanced “current” budget target unless the target is changed or postponed. | |
Budget 2020 | ___ | ___ | ___ | ___ | ___ | ||
OBR Mar. 20 (CE est.)* | -0.5 | -6.1 | -6.2 | -5.1 | -4.0 | ||
OBR Mar. 19** | +2.5 | +13.3 | +15.7 | +18.6 | +21.1 | ||
Capital Economics*** | -0.5 | -7.2 | -6.6 | -4.3 | -3.1 | ||
PSNB ex. (£bn) | 19/20 | 20/21 | 21/22 | 22/23 | 23/24 | Downgrades to the OBR’s GDP growth forecasts, in addition to a package of investment spending worth up to £70bn over five years (or around £13bn a year), may well leave the OBR’s public sector net borrowing forecast at about £78bn by 2020/21, well above the £40bn previously predicted. | |
Budget 2020 | ___ | ___ | ___ | ___ | ___ | ||
OBR Mar. 20 (CE est.)* | 44 | 78 | 79 | 79 | 79 | ||
OBR Mar. 19** | 48 | 40 | 38 | 35 | 33 | ||
Capital Economics*** | 44 | 76 | 75 | 73 | 72 | ||
Net Debt (% of GDP) | 19/20 | 20/21 | 21/22 | 22/23 | 23/24 | The OBR is no longer likely to forecast that net debt as a share of GDP is falling, as was the case in March 2019. | |
Budget 2020 | ___ | ___ | ___ | ___ | ___ | ||
OBR Mar. 20 (CE est.)* | 82 | 81 | 79 | 80 | 81 | ||
OBR Mar. 19** | 81 | 78 | 74 | 74 | 73 | ||
Capital Economics*** | 82 | 81 | 78 | 79 | 80 | ||
* Capital Economics expectation of Budget 2020 forecast. **OBR Restated March 2019 forecast published December 2019. *** Assumes the UK and the EU agree some kind of fudge that means there is not a big step change in their relationship on 31st Dec. 2020. |
Ruth Gregory, Senior UK Economist, +44 20 7811 3913, ruth.gregory@capitaleconomics.com