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Office for Budget Responsibility: What is the OBR and why does it matter? Office for Budget Responsibility: What is the OBR and why does it matter?
(3 days later)
Long-awaited forecasts for the UK economy will be published on Thursday. The Office of Budget Responsibility (OBR) has said the UK is in a recession, and warned that the economy will shrink even further next year.
They will be released by the Office for Budget Responsibility (OBR), as the government sets out plans for tens of billions of pounds worth of spending cuts and tax rises. It also said that in the two years after that, economic growth will be weaker than previously thought.
What is the OBR and what does it do?What is the OBR and what does it do?
The OBR checks the health of the UK's economy. It is independent of the government.The OBR checks the health of the UK's economy. It is independent of the government.
Its forecasts are usually released alongside big government announcements called the Budget and Autumn Statement. Its forecasts are usually released alongside big government announcements such as the Budget and Autumn Statement.
When is the Autumn Statement and how will it affect me?
Can Hunt's Budget defuse a financial timebomb?
Before the announcements, the government gives the OBR details of its plans to raise or lower taxes and how it intends to spend public money.Before the announcements, the government gives the OBR details of its plans to raise or lower taxes and how it intends to spend public money.
The OBR checks the plans and makes economic forecasts covering the next five years.The OBR checks the plans and makes economic forecasts covering the next five years.
These forecasts cover things like whether the government will spend more money than it raises, and whether the UK's economy will grow or get smaller.These forecasts cover things like whether the government will spend more money than it raises, and whether the UK's economy will grow or get smaller.
Why has the OBR been in the news? Autumn Statement 2022: Key points at-a-glance
The absence of OBR advice when the government announced huge tax cuts in September's mini-Budget was strongly criticised. What the Autumn Statement means for you
Afterwards, the value of the pound fell, the cost of government borrowing went up and the Bank of England was forced to step in to protect pension funds. What has the OBR predicted?
Critics suggested the lack of forecasts had affected confidence in the UK economy and called for them to be published. The OBR had offered to prepare a draft forecast, but the government did not take it up. The OBR has sharply downgraded its forecasts for the health of the UK economy.
It says that we are already in recession - which is when the economy shrinks continuously for six months.
Previously, it had said the economy would grow by 1.8% in 2023. Now, it is saying it will shrink by 1.4%.
The OBR says that in 2024, GDP - a measure of the size and health of a country's economy - will increase by only 1.3%, whereas it had previously forecast a rise of 2.1%.
In 2025, it now predicts a rise of 2.6% rather than 2.8%.
Why is the OBR so important?
In September, the government put forward a set of unfunded tax cuts in its mini-budget without consulting the OBR first.
The value of the pound crashed, signalling that international investors had no confidence in the government's measures.
The Bank of England was forced to step in to protect pension funds.
The OBR had offered to prepare a draft forecast, but the government did not take up the offer.
Many said the government's refusal to consult the OBR was a key reason for the lack of investor confidence.
Jeremy Hunt, who replaced Kwasi Kwarteng as chancellor after the mini-budget, says it was a mistake by the government to "fly blind".Jeremy Hunt, who replaced Kwasi Kwarteng as chancellor after the mini-budget, says it was a mistake by the government to "fly blind".
He pushed back the date of his autumn statement to allow time for more accurate economic forecasts. Mr Hunt even pushed back the date of his autumn statement to allow time for the OBR to prepare an accurate economic forecast.
He paid tribute to the work of the OBR during his Autumn Statement speech.
Most of the tax cuts promised in the mini-budget have now been cancelled.Most of the tax cuts promised in the mini-budget have now been cancelled.
Why do OBR forecasts matter?Why do OBR forecasts matter?
The OBR uses its forecasts to assess whether it thinks the government is likely to meet the rules it has set for managing the economy.The OBR uses its forecasts to assess whether it thinks the government is likely to meet the rules it has set for managing the economy.
Spending cuts of about £35bn and plans to raise £20bn in tax over the coming years are expected in the autumn statement. In the Autumn Statement, the chancellor said he would be filling a £55bn black hole in government finances, through a combination of tax cuts and tax rises.
The OBR's judgement on whether the government's plans are sound is important for investors' confidence in the UK economy. The OBR's judgement on whether the government's plans are sound is important to investors. They help fund government spending by buying its bonds - which are a type of IOU.
This means some of the government's borrowing costs depend on what markets make of the OBR's forecasts. This means some of the government's borrowing costs depend to a great extent on what markets make of the OBR's forecasts.
Why was the OBR created?The OBR was set up in 2010 under the Conservative/Liberal Democrat Coalition government. Why was the OBR created?
The OBR was set up in 2010 under the Conservative/Liberal Democrat coalition government.
Previously, the government produced its own economic forecasts.Previously, the government produced its own economic forecasts.
The OBR was intended to result in independent analysis of the UK economy that could not be influenced by politics.The OBR was intended to result in independent analysis of the UK economy that could not be influenced by politics.
Who is in charge of the OBR?The OBR is led by a Budget Responsibility Committee. It has three members, including the current OBR chairman Richard Hughes.Who is in charge of the OBR?The OBR is led by a Budget Responsibility Committee. It has three members, including the current OBR chairman Richard Hughes.
The committee is responsible for the OBR's forecasts and its other main responsibilities.The committee is responsible for the OBR's forecasts and its other main responsibilities.