OBR’s assessment of Budget’s impact on household spending: nil
Page 46 of the OBR’s economic and fiscal forecast sets out their view on what the Budget will achieve for our economy. On household spending its message is pretty clear – this isn’t a Budget that’s going to do much to boost consumption. While the OBR note ‘there are a number of measures that increase real household disposable income’ including raising the personal allowance, the tapering in the reduction of Child Benefit and the reduction in the annual rate of income tax, they note that ‘a number of other measures are likely to reduce real disposable income, including the changes to age related allowances and the widening of the VAT base’.
Importantly, they also conclude that ‘the net effect on real household disposable income is likely to be small, and the effect on consumption will depend on the marginal propensities to consume of the winnder and losers’. Given the OBR already recognise the larger economic benefits of boosting the incomes of those are the worst off, and that the Treasury’s own distributional assessment shows that this group are (when the top decile is excluded) the biggest losers of the Budget, the OBR’s careful words could be seen to imply that today’s measures are not well targeted for growth.