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29 October 2019

How an early election would allow Boris Johnson to dodge damaging economic forecasts

The cancellation of the Budget means weaker growth and higher government borrowing will not be officially reflected. 

By George Eaton

Until recently, Sajid Javid was due to deliver his first Budget as Chancellor on 6 November. But as soon as Boris Johnson announced his intention to seek a December general election, the event was abruptly cancelled. 

The decision does not only mean a delay to introducing new tax and spending policies. Crucially, it also means that the independent Office for Budget Responsibility will no longer publish updated official economic forecasts  something Johnson has cause to be grateful for. 

In the months since the OBR published its last forecasts in March, growth has weakened and government borrowing has increased (GDP fell by 0.2 per cent in quarter two of this year and borrowing has increased by 22 per cent or £7.4bn in the current financial year). The Resolution Foundation has estimated that the £27bn of spending “headroom”, announced by previous chancellor Philip Hammond as protection against the costs of Brexit, has been replaced by a £16bn deficit. 

The Conservatives’ new approach is defensible. Public services have long been starved of resources after nearly a decade of austerity, and ultra-low government borrowing costs (below 1 per cent) mean the state can afford to expand and invest. But the Tories, the party that for so long promised to deliver a budget surplus, should still be forced to account for their change of direction (as well as for lower growth). 

The absence of a Budget, however, deprives opposition parties of a crucial opportunity to do so. Though the OBR will publish a revised version of its March forecast, reflecting recent statistical changes, this will not represent the transformation in the UK’s economic position. Crucially, it will also not take into account the new tax and spending policies that will now be announced in the Conservatives’ election manifesto (Labour has previously called for the OBR to audit all parties’ manifestos). 

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But in an election that will be defined by Brexit, the most important forecast is perhaps one of the government’s own. Based on figures published last year, Johnson’s deal would reduce growth by around 6.7 per cent of GDP (£130bn) between now and 2034. The average person would be £2,250 a year poorer by the end of this period. But in an era of profound mistrust, how much resonance will such numbers have?