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British Government Fiscal Sustainability Report July 2012
British Government Fiscal Sustainability Report July 2012
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The Office for Budget Responsibility (OBR) was created in 2010 to provide independent and authoritative analysis of the UK’s public finances. As part of this role, the Budget Responsibility and National Audit Act 2011 requires us to produce “an analysis of the sustainability of the public finances” once a year.
Our approach to analyzing this issue is twofold:
• first, we look at the fiscal impact of past public sector activity, as reflected in the assets and liabilities that it has accumulated on its balance sheet; and
• second, we look at the potential impact of future public sector activity, by examining how spending and revenues may evolve over the next 50 years – and the impact this would have on public sector net debt.
Broadly speaking, the fiscal position is unsustainable if the public sector is on course to absorb an ever-growing share of national income simply to pay the interest on its debts. This notion of sustainability can be quantified in a number of ways.
It is important to emphasize that the long-term outlook for public spending and revenues is subject to huge uncertainties. Even backward-looking balance sheet measures are clouded by difficulties of definition and measurement. The long-term figures presented here should be seen as broad-brush illustrative projections rather than precise forecasts. Policymakers need to be aware of these uncertainties, but should not use them as an excuse for ignoring the long-term challenges that lie ahead.
The analysis and projections in this document represent the collective view of the three independent members of the OBR’s Budget Responsibility Committee. We take full responsibility for the judgments that underpin them and for the conclusions we have reached. We have, of course, been supported in this by the full-time staff of the OBR, to whom we are as usual enormously grateful.
We have also drawn on the help and expertise of our advisory board and of officials across government, including the Department for Work and Pensions, HM Revenue and Customs, HM Treasury, the Department of Energy and Climate Change, the Department of Health, the Department for Business, Innovation and Skills, the Government Actuary’s Department, and the Office for National Statistics. We have had very useful discussions on our analysis of the health sector with John Appleby and colleagues from the King’s Fund, and with Anita Charlesworth and colleagues from the Nuffield Trust.
We provided the Chancellor of the Exchequer with a draft set of our projections and conclusions on 28 June, to give him the opportunity to decide whether he wished to make further policy decisions that we would be able to incorporate in the final version. He did not. We provided a full and final copy of the report 24 hours prior the publication, in line with the standard pre-release access arrangements. At no point in the process did we come under any pressure from Ministers, special advisers or officials to alter any of our analysis or conclusions. A full log of our substantive contact with Ministers, their offices and special advisers can be found on our website.
Our approach to analyzing this issue is twofold:
• first, we look at the fiscal impact of past public sector activity, as reflected in the assets and liabilities that it has accumulated on its balance sheet; and
• second, we look at the potential impact of future public sector activity, by examining how spending and revenues may evolve over the next 50 years – and the impact this would have on public sector net debt.
Broadly speaking, the fiscal position is unsustainable if the public sector is on course to absorb an ever-growing share of national income simply to pay the interest on its debts. This notion of sustainability can be quantified in a number of ways.
It is important to emphasize that the long-term outlook for public spending and revenues is subject to huge uncertainties. Even backward-looking balance sheet measures are clouded by difficulties of definition and measurement. The long-term figures presented here should be seen as broad-brush illustrative projections rather than precise forecasts. Policymakers need to be aware of these uncertainties, but should not use them as an excuse for ignoring the long-term challenges that lie ahead.
The analysis and projections in this document represent the collective view of the three independent members of the OBR’s Budget Responsibility Committee. We take full responsibility for the judgments that underpin them and for the conclusions we have reached. We have, of course, been supported in this by the full-time staff of the OBR, to whom we are as usual enormously grateful.
We have also drawn on the help and expertise of our advisory board and of officials across government, including the Department for Work and Pensions, HM Revenue and Customs, HM Treasury, the Department of Energy and Climate Change, the Department of Health, the Department for Business, Innovation and Skills, the Government Actuary’s Department, and the Office for National Statistics. We have had very useful discussions on our analysis of the health sector with John Appleby and colleagues from the King’s Fund, and with Anita Charlesworth and colleagues from the Nuffield Trust.
We provided the Chancellor of the Exchequer with a draft set of our projections and conclusions on 28 June, to give him the opportunity to decide whether he wished to make further policy decisions that we would be able to incorporate in the final version. He did not. We provided a full and final copy of the report 24 hours prior the publication, in line with the standard pre-release access arrangements. At no point in the process did we come under any pressure from Ministers, special advisers or officials to alter any of our analysis or conclusions. A full log of our substantive contact with Ministers, their offices and special advisers can be found on our website.
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