Budget forecasts: take them with a pinch of salt - Full Fact
Predicting the future is hard—but forecasts are useful for policy makers.
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And yet many chose to take a leap of faith over the issue of 1.02% of GDPForecasting GDP over the short term is notoriously difficult, forecasting over the long term is our stupidity.
A discrepancy of just 4% over the 'long term' is negligible, given the uncertainty in the assumptions.
However, to those who don't really understand the issues, it clearly does help them to justify their positions!
I don’t understand the point you are trying to make.And yet many chose to take a leap of faith over the issue of 1.02% of GDP
If 4% is negligible, then UK EU contributions at 1.02% or less must be less than negligible?I don’t understand the point you are trying to make.
If 4% is negligible, then UK EU contributions at 1.02% or less must be less than negligible?
Sorry
What source do you have to show it's higher, I ask as 1.02% was an outlier.So you are trying to compare a 'known', increasing annual cost (the cost of being in the EU, which was actually much higher than the number you quote), with a difference between two long term economic projections, each based on a multitude of assumptions?
Contribution | Average spend (£billion) | % GNI |
---|---|---|
Gross contribution | 14.19 | 0.68% |
Net contribution | 8.22 | 0.40% |
Non-aid overseas spend | 6.37 | 0.31% |
What source do you have to show it's higher, I ask as 1.02% was an outlier.
Table 1: Overview of UK contributions to the EU 2014-2018 (2019 prices)
Contribution Average spend (£billion) % GNI Gross contribution 14.19 0.68% Net contribution 8.22 0.40% Non-aid overseas spend 6.37 0.31%
Erm?We know the net contribution doesn't cover all of the costs - that's why there is an additional £40bn owed ('the divorce bill').
The point stands, you are comparing apples and kumquats.
Erm?
So, You ask to leave an annual subscription on date X but have already agreed to additional spending for your citizens benefit beyond that exit date and that payment becomes "additional"?
Pensions don't just stop. Ask Nigel.No, the costs related to the previous period while we were in the EU. It was not covered by the contribution, hence is an ADDITIONAL cost.
Pensions don't just stop. Ask Nigel
It’s quite simple, these are liabilities incurred while we were members of the EU. Hence that cost needs to be added to the contributions paid to give the total cost of membership.The divorce bill is the amount the UK has agreed to pay in settlement of its outstanding liabilities when its leaves the EU.
The EU has been clear that the UK was expected to pay off its share of the liabilities when it leaves the bloc. The initial discussions covered both contributions due under the current multiannual financial framework (EU budgets are in seven-year chunks, and the current one ends in December 2020); amounts outstanding from earlier commitments but due after the end of the multiannual financial framework (so-called reste à liquider); and contributions to future liabilities of the EU – in particular, pensions to EU civil servants as well as some loans the EU has made, for example, to Ukraine.
On the assets side, the most notable asset was the UK’s capital share of the European Investment Bank. The EU initially asked that the UK settle upfront in a lump sum. The detail of all the headings that the European Commission put on the table is set out in its working paper Essential Principles on Financial Settlement, published on 24 May 2017. Reports from Brussels suggested that the Commission’s original position was toughened up by the EU member states in internal discussions to include, for example, continued support for Common Agricultural Policy payments.
The December Joint UK-EU report showed that both sides had agreed a methodology for working out what the UK would pay – and that those payments would be made in advance as they fell due rather than settled in one go.
The divorce bill is prior commitments and even then are not earth-shattering at £40Billion of GDP.It’s quite simple, these are liabilities incurred while we were members of the EU. Hence that cost needs to be added to the contributions paid to give the total cost of membership.
i‘m not sure why you are disputing this?
The divorce bill is prior commitments and even then are not earth-shattering at £40Billion of GDP.
If you dismiss forecasts of 4% point as negligible, then total EU contributions are "less than" negligible, as even if you aggregate the divorce payments the total is still less than 4.
Plus of course with we can't take forecasts as useful at all then, planning is a busted flush, including Brexit futures.
Out of interest, if the OBR projections are "vague uncertain projections, multiple years into the future", do you feel that the annual Budget review should be equally ignored as 'stupid', as it's based in part around their work?Prior commitments? So at last you do understand that these are additional costs above and beyond the contributions paid? That’s some progress.
Ok if you want to hang your hat on these flawed comparisons then you should do so. Bit it’s absolutely clear you don’t appreciate the difference between a known figure and a vague uncertain projection, multiple years into the future. When short-term projections have been massively wrong.
Out of interest, if the OBR projections are "vague uncertain projections, multiple years into the future", do you feel that the annual Budget review should be equally ignored as 'stupid', as it's based in part around their work?
I’m not sure how you could come to thst conclusion, based on what I’ve written.
Annual = 1 year.
Long-term = multiple years (decades?) into the future.
if the short-term projections are full of uncertainty and notoriously inaccurate, how much weight would you place on long-term projections where the uncertainty increases exponentially?
Forecasting GDP over the short term is notoriously difficult, placing any weight on forecasts over the long term is pure stupidity.
Was he comparing two different long-term forecasts and placing significant credibility on the difference between the two?It was this bit that prompted me to ask the question;
Suggesting that putting any weight into longer term forecasts is "pure stupidity".
Hence why I asked if you think our regular Budget forecasts, like the one from Sunak yesterday, is equally stupid, as it's based on similar OBR predictions of the economy in the future.
I'm not sure what relevance that has, to the simple question I asked you?Was he comparing two different long-term forecasts and placing significant credibility on the difference between the two?
I'm not sure what relevance that has, to the simple question I asked you?
I'm just interested in what long term economic forecasts aren't stupid, and if it's only those highlighting potential negative impacts that should be ignored?
Pension liabilities remain if there is a deficit already, and if these are final salary pensions then there is a liability if there is a future shortfall in income from investments that needs to be made up.Pensions are no longer accruing after we have left. The costs relates to past acrrual and hence was an additional cost of membership, not included in your figures. Hence the use of the word 'additional'.
Regardless, it's still a stupid comparison.
Again though, does that mean the projections referenced by Sunak yesterday are equally uncertain?it helps to understand the uncertainty in those projections. Which is multiple times the 4% number that some people are so fixated on.
And those liabilities relate to costs incurred while we were in the EU, which was my point.Pension liabilities remain if there is a deficit already, and if these are final salary pensions then there is a liability if there is a future shortfall in income from investments that needs to be made up.
I haven’t said you should accept anything.Again though, does that mean the projections referenced by Sunak yesterday are equally uncertain?
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"Chancellor Rishi Sunak on Wednesday delivered a “tax, spend and save” Budget in which improved official forecasts gave him a £35bn annual windfall of additional revenue on top of the £36bn a year of tax rises he had already imposed."
I can't help feeling it's a little selective to criticise the accuracy of OBR predictions that are negative towards the real economic impact of Brexit, yet we're apparently supposed to accept those same forecasts when they're suggesting an "annual windfall" over the next 6 years, coincidentally.