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Public Works is UNISON Scotland's campaign for jobs, services, fair taxation and the Living Wage. This blog will provide news and analysis on the delivery of public services in Scotland. We welcome comments and if you would like to contribute to this blog, please contact Kay Sillars k.sillars@unison.co.uk - For other information on what's happening in UNISON Scotland please visit our website.

Friday, 30 August 2013

OBR Forecasts and why it matters

The UK Office of Budget Responsibility (OBR) was created in 2010 to give an 'objective' assessment of the state of public finances. This requires them to forecast economic trends that could impact on public finances such as inflation, wage rises and tax. It is therefore very important to UNISON members these forecasts are as accurate as any look into the future can be. Sadly, their track record is not impressive so far.

In this context the Reid Foundation has published a helpful paper, written by Jim Cuthbert, on OBR forecasts from a Scottish perspective. The paper highlights a number of areas where the OBR has got its forecasts wrong and why.

I would add one more example to Jim's list, wage forecasts. I blogged in this in June:

"I recently came across this interesting assumption in the Office of Budgetary Responsibility’s budget forecast: “Whole economy wages are expected to grow by 1.4 per cent this year and around 2.7 per cent in 2014, rising gradually to 4.0 per cent in 2016”. This means the Chancellor’s revenues are dependent on a pretty dramatic increase in real wages as the table below shows. Hard to see where that revenue is coming from given continued pay cuts in the public sector."

The importance of this forecast is that the Treasury uses it for expenditure assumptions including pensions. If the forecast is on the high side, as most would say it was, then pensions are made to look more expensive than they really are. Sounds familiar?

Either way pay negotiators might want to include this forecast in pay claims. If it's good enough for the Treasury.........

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