OBR chief Robert Chote is now outlining a list of spending risks that could threaten the UK.
Medium-term risks include austerity fatigue, health spending and welfare reforms.
Long-term risks include social care costs, Britain’s ageing population, and the pensions ‘triple-lock’ (under which pensions rise by inflation, wage growth, or at least 2%).
On social care, Chote says it would be “nice” to present some new analysis, but as the government’s response to the Dilnot Review has been languishing in Whitehall for years, the OBR can’t crunch the numbers.
He also tacitly criticises the decision to remove free TV licenses from over-75s, saying it is “unusual” to delegate decisions about welfare benefits to a broadcasting company.
Worryingly, Britain’s fiscal watchdog says that weak business surveys from June suggest that Britain may already be entering a “full-blown recession”.
Surveys were particularly weak in June, suggesting that the pace of growth is likely to remain weak. This raises the risk that the economy may be entering a full-blown recession.
The fiscal risks posed by recessions depend on their depth and persistence, the sectors most deeply affected, and the pace at which the economy subsequently recovers
If Britain leaves the EU without a deal, the OBR explains that UK tax revenues would shrink, pushing up government borrowing.
The OBR estimates that UK government borrowing would be around £30bn a year higher than planner in 2020-21, based on the International Monetary Fund’s analysis from April (explained at 8.23am).
However, the OBR also warns that the IMF’s forecasts are ‘more benign’ than other views, and ‘by no means a worst-case scenario’. That suggests that a no-deal Brexit could be even worse than thought.
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