This was the bit of the OBR’s November fiscal outlook (in Table 4.8) that rescued Osborne’s Autumn Statement with tens of windfall billions.
These modelling changes projected substantial increases in in-year and future year tax revenues. As you can see from the chart above, these projected increases in future revenues were substantially attributable to “modelling” changes to NICs and VAT (explained at, in particular, Box 4.2).
They rescued Osborne by enabling him to kick the tax credits can down the road (and by creating room for further spending), as the Resolution Foundation identified.
On Friday, the OBR released its Monthly Public Finances Release enabling us to see how those November forecasts are bearing up.
In short, not so well.
For each of NICs and VAT, the 2015-16 out-turn looks unlikely to match the OBR’s upgraded November forecasts.
To hit those forecasts:
- NICs (or Compulsory social contributions as it is described above) receipts in February and March would have to grow 5.9% from 2014-15 compared with November’s full year forecast growth of 4% and growth so far this year of 3.5%.
- VAT receipts in February and March would have to grow 5% from 2014-15 compared with November’s full year forecast of 3.9% and growth so far this year of 3.7%.
As I pointed out here (but others have shown far more elegantly) the OBR’s forecasting record is consistent only in its tendency to optimism.
I went on to observe, of that windfall, that:
Predictably enough, the OBR’s January release evidences only that November marked a continuation of that optimism. And, once again, it seems likely the Chancellor will fail to achieve his windfall growth in tax receipts that were projected only in November.