Chapters Financial News

The UK's Chancellor, Rachel Reeves, will deliver her Spring Statement on 26 March.

Many clients and readers of our blogs and newsletters will know that we love a statistic or two to sprinkle through the text of the financial topic we are addressing. Gathering data is interesting, with many sources to refer to, some reliable and official sources, some not so.

We are not alone in relying on data and statistics, and many political decisions are made using official sources.

Whenever a government Budget or a Statement is delivered, there is generally significant reference to two organisations – the Office for Budget Responsibility (OBR) and the Office for National Statistics (ONS) for data and statistics. Both are also frequently referenced by politicians, journalists, companies, investors, charities, Chapters Financial…the list could go on. In fact, we hear from or about the OBR and the ONS so often that it's easy to accept them as part of the economic furniture, as it were, without digging deeper. What does each do?

We thought it would be an appropriate time to have a look at what both organisations do, how their assessments and forecasts are used, and the effect these can have on policy decisions.

Office for Budget Responsibility (OBR)

Before the establishment of the OBR, the government used to produce its own economic forecasts. The OBR was set up in 2010 and was intended to provide independent analysis of the UK's public finances, unencumbered by party politics. It monitors and evaluates the UK government's spending plans and performance, and twice a year, tying in with the Budget and the Spring Statement, the OBR releases detailed five-year forecasts on the state of the economy and public finances.

Prior to these bi-annual forecasts, the government provides the OBR with details of its fiscal plans (how it intends to raise and to spend money). The OBR then assesses this information and produces economic forecasts covering areas such as government spending versus borrowing and projected economic growth / contraction over the coming five years.

These forecasts are important because they are used to assess how likely it is that the government will meet their own rules for managing the economy. The OBR's view on the soundness (or not) of the government's plans will be used by investors to help them decide whether (or not) to buy government bonds. This in turn will affect some of the government's borrowing costs.

Prior to the current Labour administration, there was no specific law requiring the government to consult the OBR before announcing big spending or tax changes. This has now changed, largely as a result of the Truss mini-budget in September 2022, which announced a range of unfunded tax cuts without prior consultation with the OBR. The subsequent loss of investor confidence in the pound, and in UK government debt, had wide-ranging consequences which continue to be felt. With this in mind, the current government has put in place a new law requiring any fiscally significant measures announced to be accompanied by an independent OBR assessment.

Office for National Statistics (ONS)

The ONS is the UK's largest independent producer of official statistics, and it's the UK's recognised national statistics institute. The ONS is responsible for collecting and publishing statistics related to the economy, society and population of the UK at national, regional and local levels, and it also conducts the 10-yearly census in England and Wales.

The ONS publishes over 600 releases a year on a huge range of statistics, such as the UK's National Accounts (gross domestic product/GDP, national income and expenditure as examples), population and demographic statistics, government and business output and activity, price statistics (such as consumer prices), the labour market, including employment, unemployment and earnings, births, marriages and deaths, social statistics and more.

These statistics are vital in indicating the position, and perhaps the indicated direction of travel, for each of the varied (and topical) areas covered.

More can be found on the ONS website here: https://www.ons.gov.uk/aboutus/whatwedo/statistics/statisticsweproduce

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Summary

Knowing the source and reliability of where data and statistics comes from can be very important in the economic decisions that are made, both as a nation, but perhaps more importantly for your own business and personal financial planning.

We will no doubt continue to add relevant statistics where appropriate to our blogs and articles, and hope that they continue to make for an interesting read.

Keith Churchouse
Director
CFP Chartered FCSI
Chartered Financial Planner

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