News conference by Robert Chote of the Office for Budget Responsibility
UK ‘will lose fewer public jobs’
The independent Office for Budget Responsibility (OBR) says public sector job losses will not be as high as previously thought.
The OBR now expects 330,000 public sector workers to lose their jobs over the next four years, far fewer than the 490,000 it forecast in its June report.
At the same time, it raised its estimate for economic growth this year, from 1.2% to 1.8%.
But it lowered its growth estimates for the next two years.
The body says economic performance next year will be growth of 2.1% – down from its previous 2.3% forecast; and 2.6% in 2012, down from the 2.8% previously pencilled in.
There were further relatively positive predictions on jobs, with a forecast that, after a peak of just over 8% unemployment in 2011, the rate would fall steadily to just over 6% by 2015, by which time the OBR expects one million private sector jobs will have been created.
Its forecasts precede the government’s annual Autumn budget statement.
That will be given to Parliament by the Chancellor, George Osborne, later this afternoon.
Analysis
The biggest news is the big reduction in the job losses forecast in the public sector between now and 2014-15. The OBR now thinks the public sector workforce will shrink by 330,000 over that period, not 490,000, though they expect another 80,000 to lose their jobs in 2015-16.
Mr Osborne will be pleased by the very modest change in the borrowing forecasts, though the OBR expects tax revenues to be £2.4 bn lower than forecast by 2015-16, and it now thinks that he will only save £9.6bn from the extra welfare cuts in the Spending Review, about £1bn less than he hoped.
Bad news for homeowners. The OBR thinks house prices will fall by 3.1% in 2011. Previously it had expected a small rise.
The OBR said the impact of government measures to cut the deficit, which include an increase in VAT from the current 17.5% to 20% and the £81bn of planned spending cuts would lead to “sluggish growth” in the medium term.
A statement from the body said: “The economy will continue to recover from recession, but at a slower pace than in the recoveries of the 1970s, 1980s and 1990s.”
The OBR’s chairman, Robert Chote, said the government’s planned consolidation plans were consistent with sustaining an – albeit slow – economic recovery, although he warned such predictions were never assured.
He said: “There is considerable uncertainty around any economic forecasts”.
Mr Chote stressed the independence of the OBR’s views, saying: “We have not come under any pressure from ministers or their advisers to change any of [our forecasts]”.
Mr Osborne will respond to the OBR’s updated forecasts, rather than setting out draft tax and spending plans as happened under Labour’s Autumn budget statement.
He has already announced the next Budget will be on 23 March 2011.
The OBR was formed by the coalition government in May and is intended to make an independent assessment of the public finances ahead of each Budget.
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