The independent forecasts used by
Tory MPs were left furious as the Office for Budget Responsibility admitted the ‘central’ scenario for its gloomy projections did not account for the rollout of the immunity jab beginning before
The forecasts were based on Britain languishing under virus restrictions until next summer – despite the Prime Minister this week saying life would start getting back to normal by Easter.
Under its main scenario, the OBR said it expected a ban on household mixing until the middle of 2021, with pubs and restaurants closed in many areas.
NHS Test and Trace was also assumed to remain ‘partly effective’ – with the vaccine not widely available until the ‘latter half of the year’.
Britain’s Chancellor of the Exchequer Rishi Sunak speaks on Spending Review 2020 and the Office for Budget Responsibility’s latest economic and fiscal forecast at the House of Commons in London, November 25, 2020
Mark Harper, who is leading the Covid Recovery Group of Tory MPs, raised concerns in a WhatsApp message to group members – saying it was not what ministers had promised.
Last night the OBR admitted its forecast had been produced before it was announced on Monday that the Oxford/AstraZeneca vaccine had up to 90 per cent effectiveness.
It throws the Chancellor’s entire Spending Review into doubt as it is based on what could be seen as an ‘out-of-date’ analysis.
The OBR’s best-case scenario, which is based on a vaccine being widely available by the spring, is considerably more optimistic than its ‘central’ scenario.
Under this model, GDP is likely to fall by 10.6 per cent this year, rather than 11.3 per cent with Mr Sunak telling the Commons the economy will return to pre-pandemic levels in 2022 – a full year earlier than the central scenario.
House prices could fall 8 per cent as the stamp duty holiday ends
By Matt Oliver for the Daily Mail
House prices could fall by as much as 8 per cent in spring as the stamp duty holiday ends and job losses surge.
The market is currently booming with the help of the tax break.
But prices are expected to slam into reverse when Rishi Sunak’s cut to stamp duty expires in April and the furlough scheme ends, leaving more unemployed, the Office for Budget Responsibility (OBR) warned.
The watchdog estimates that in the second quarter prices could fall by as much as 8 per cent year-on-year.
Overall it expects prices to drop by 3.5 per cent next year and by another 2.6 per cent in 2022.
They are not expected to return to growth until 2023. But even then, by 2025 prices are expected to be 17 per cent lower than they would have been because of the pandemic.
OBR experts also warned that a No Deal Brexit could hammer the market further. This is because it will probably cause unemployment to rise, said the watchdog’s Professor Sir Charlie Bean. ‘Is it reasonable to think there might be more downward pressure on prices [in the event of No Deal]? Probably, yes,’ he added.
It also emerged yesterday that the stamp duty holiday is expected to cost the Treasury more than originally forecast – £3.3billion rather than £2.5billion – because the market has been busier than expected.
Around 830,000 fewer people will be left unemployed at the peak next year, and national debt as a proportion of GDP will be 14 per cent lower in 2025.
Shaun Butcher, deputy chief of staff for the OBR, said last night: ‘When we produced the forecast and went to press, we didn’t have the Oxford announcement.
‘That makes things more positive… and we would be moving towards the upside [forecast].
‘In our next forecast, which we will produce by the end of the financial year, we’ll be able to reflect that.’
He added that if there was a delay in the rollout of the vaccine or if the virus were to mutate, lowering the efficacy of the vaccine, then the central scenario would again become more likely.
Mr Butcher emphasised that its economists used a ‘very broad brush set of assumptions’.
The central scenario aims to represent a time when ‘a reasonable proportion of the population’ has received the vaccine.
Tory MPs last night sounded the alarm over Mr Sunak’s use of forecasts based on the assumption lockdown restrictions will be in place until mid next year.
Mr Harper said: ‘It is clear the Treasury and the Chancellor have based their assumptions on the central scenario.
‘So the Government’s own assumption is that Test, Trace and Isolate remains only partly effective… it also shows that the Government is assuming vaccines are widely available only from mid-2021.’
He added: ‘This does not appear to be consistent with what other ministers have been telling us. It is essential the Government sets out clearly the details behind its Covid-19 Winter Plan before we’re asked to vote on it next week.’
Mr Harper, who is a former chief whip, urged fellow MPs to raise their concerns with the Prime Minister and the Chancellor.
A No 10 spokesman said last night: ‘These are not our assumptions.’ A Treasury source pointed out the OBR is independent.