Sunak to base Budget forecasts on old data

RISHI SUNAK has asked the fiscal watchdog to produce Budget forecasts using out-of-date figures.

The Chancellor’s request, which the Office for Budget Responsibility agreed to, means the forecasts for the Budget on Oct 27 will be based on data that paints a gloomier picture of the economy than current figures show.

The OBR said that it had ended any updates to its forecast on Sept 24 – more than a month before the Budget – and this was “earlier than usual in response to a request from the Chancellor”.

It could help Mr Sunak fend off last-minute requests for extra cash from ministers.

Instead of the economy being 2.4pc smaller in July than its pre-pandemic peak, the revised data show the recovery has been much stronger and the gap is now only 1.5pc for the same month. The OBR’S diclosure yesterday came after queries from the Financial Times.

The move will also help the Chancellor to deliver an improvement in the state of the economy at the next Budget while also having more room to announce pre-election tax cuts, as well as raising his chances of having a public finance windfall.

If the OBR had continued to update the forecasts, these would have included data that paint a more bullish picture of the UK economy during the pandemic, as the recovery has been much stronger than predicted.

Despite shortages of fuel and drivers and supply chain chaos, economic forecasters have been upgrading their predictions for growth this year and next following changes to the official data.

The Treasury said: “The timing of the forecast is an operational decision which was made in the summer. The forecast timing is intended to allow more time for decisions ahead of a three-year spending review, as was the case in 2015.”

In 2015, the forecast process was closed after the OBR included the annual revisions to official data only two and a half weeks before the spending review.

This year the Treasury requested an end to forecast updates five weeks before the Budget.

The Bank of England has confirmed it will use up-to-date economic data in the forecasts it will use for deciding on interest rates on Nov 4.