Office for Budget Responsibility: economic and fiscal outlook, July 2015(9088 Cm.)

The 'Economic and Fiscal Outlook: July 2015 (Cm. 9088)' sets out forecasts up to 2020-21. It also assesses whether the Government is on course to meet the medium-term fiscal objectives that it has set itself, including the proposed new targets that it has set out in this Budget. The Charter for Budget Responsibility requires the OBR to judge whether the Government has a greater than 50 per cent chance of hitting its fiscal targets under existing policy. The current version of the Charter (updated by the Coalition Government in December 2014) sets out three targets formally in place for this forecast: the fiscal mandate: a forward-looking aim to achieve a cyclically adjusted current balance by the end of the third year of the rolling, 5-year forecast period; the supplementary target: an aim for public sector net debt as a percentage of GDP to be falling in 2016-17; the welfare cap: a ceiling on cash spending on a subset of social security benefits and tax credits. Alongside the Budget the new Government has now published a revised draft Charter that will be laid before the Parliament for approval ahead of the next fiscal forecast. This would: replace the current fiscal mandate with a target for a surplus on public sector net borrowing by the end of 2019-20. Once a headline surplus has been achieved the mandate will require a target for a surplus on public sector net borrowing in each subsequent year; replace the supplementary target with a target for public sector net debt as a percentage of GDP to be falling in each year to 2019-20. The OBR judged that the Government has a greater than 50 per cent chance of meeting both the current and proposed fiscal mandate. The OBR estimates that the cyclically adjusted current balance will move from a deficit of 2.4 per cent of GDP in 2014-15 to a surplus of 1.1 per cent in the mandate year of 2018-19. In terms of the current and proposed supplementary debt targets, the forecast shows debt falling on a share of GDP in every year of the forecast, thereby meeting both. The Government has reset the level of spending permitted under the welfare cup in this Budget, as the Charter requires to do at the start of each Parliament. The new cap is significantly lower than the old, by 13 per cent in 2019-20. This reflects the Government's decision to lock in the savings from the package of working-age welfare spending cuts that it has announced in the Budget, which reach 12.5 billion in the forecast by 2019-20. The largest of those cuts are focused on reducing the generosity of tax credits and working-age benefits, by freezing most in cash terms for four years, by changing maximum entitlements and withdrawal rates in tax credits and universal credit, and by forcing social sector landlords to cut the rents that are subsidized through housing benefit.