Letter from the Chief Economic Adviser,
HM Treasury, to the Clerk of the Committee
In your letter of 29 July you asked for an organogram
of the forecasting process and more information on the resources
involved as input to your Inquiry into the Permanent OBR.
I have attached two documents that I hope meet your
requests.
The first document is an organogram of the forecast
process, which sets out the key stages and staff involved in producing
the OBR's economic and fiscal forecast at the June Budget.
The Budget Responsibility Committee's (BRC)
advice to the Chancellor on the arrangements for establishing
the OBR on a permanent basis set out that the OBR's Budget forecasts
were produced using the full forecasting resources of the Treasury,
HMRC and DWP. And the OBR June Budget forecast document explains
that the BRC "made or agreed all judgements in the forecasts".
The forecast process itself included three main
elements: economy forecast, fiscal forecast and policy effects.
— The BRC made or agreed all judgement
in the economy forecast. The overall economy forecast numbers
were co-ordinated and compiled by part of a central Treasury team.
— The OBR economy forecast was sent to
fiscal forecast suppliers for them to use as the economic determinants
in their individual fiscal forecasting models. These individual
fiscal forecasts were provided to the BRC for them to challenge
and the BRC made or agreed all final judgements in these forecasts.
These forecasts were compiled into fiscal aggregates by the Treasury's
central fiscal forecasting team.
— As the OBR's Budget forecast document
explains the BRC scrutinised the Government's assessment of the
direct costs or yield of Budget policy decisions that affect the
economy and public finances forecast. The OBR's economy and fiscal
forecasts also reflect the OBR's judgement of the effects of Budget
policy measures on the forecasts.
The elements of the OBR forecasts were compiled
into overall aggregates and considered in the round by the BRC
to produce the OBR's June Budget economic and fiscal forecast.
The second document is a table that gives more
information on the resources involved in producing the forecast.
which shows approximate numbers of people involved in the forecast
process and the approximate amounts of time that they spend on
producing the forecasts for the Budget. There are over 100 staff
involved in the forecast. A small proportion of these staff spend
the vast majority of their time working on the forecast. However,
for most of these staff the forecast is only one component of
their role. The majority of the resource deployed on the forecast
is also heavily deployed in other departmental work, even at times
of the year when forecast and Budget processes are in train.
23 August 2010
ECONOMIC AND FISCAL FORECAST
RESOURCES AT THE JUNE BUDGET
The Committee asked for a breakdown by grade
of the resources used as part of the forecasting process. The
below tables set out approximate numbers of staff at grade ranges
and an approximate amount of time spent on producing the forecast
over the period from Monday 17 May to Monday 21 June.
| Area/Dept | Role in OBR forecast
| Role in other departmental work |
Approx number of people | Approx number of people in each grade range (approx average percentage of time spent on producing the forecast)
|
| Interim OBR Secretariat | Scrutiny, challenge and presentation of OBR forecasts
| N/a | 8 | Grade 5: 1 (100%) Grade 6-7: 4 (100%) Grade SEO-AA: 3 (100%)
|
| HMT central forecast co-ordination | Co-ordination and collation of economy and fiscal forecasts to produce the aggregate economy and fiscal forecast numbers.
| Analysis and centre of expertise on economy and fiscal forecast.
| 10 | Grade 5: 1 (Approx 60%) Grade 6-7: 4 (Approx 95%) Grade SEO-AA: 5 (Approx 95%)
|
| HMT economic analysis and forecasts | Producing economic analysis and parts of the economy forecast.
| At least 50% of time both during and outside of forecast rounds spent producing economic analysis of economic issues, briefing on latest data.
| 20 | Grade 5: 2 (Approx 40%) Grade 6-7: 7 (Approx 50%) Grade SEO-AA: 10 (Approx 50%)
|
| DWP/DWP benefits forecast | DWP provide the DWP benefits spending forecast, assess in-year trends and produce longer-term analysis.
| At least 50% of time providing forecasts and analysis of the numbers of benefit claimants and expenditure for departmental policy making and departmental financial and staff planning, which can also be required at same time as forecast rounds. Provision of briefing and analysis of benefit expenditure (including for PQs).
| 30 | Grade 5: 1 (Approx 50%) Grade 6-7: 9 (Approx 50%) Grade SEO-AA: 20 (Approx 50%)
|
| HMRC/tax receipts forecast | Provide HMRC receipts forecasts, producing the in-year forecasts and HMRC co-ordination.
| Monitoring receipts, analysing receipts trends and costing policy options for HMT and HMRC policy development. Analysis and policy costing work is often required during Budget/forecast process.
| 25 | Grade 5: 1 (Approx 10%) Grade 6-7: 11 (Approx 25%) Grade SEO-AA: 13 (Approx 50%)
|
| Other HMT and departmental resource which contributes to the forecast
| Providing elements of the receipts, spending and financial transactions forecast. Depts contributing include HMT, CLG, GAD, each public service pension scheme, DCMS, DMO, NIE, BIS and DECC.
| Large majority of time spent on a range of functions for departments, including operational and policy analysis. This work can also be needed during forecasting rounds.
| Approx 20-40 | Typically a small proportion of time spent on forecast work (ie less than 20%)
|
|
