2 Conclusions
16. Projecting the future path of public finances
over a 50 year period is a highly uncertain and difficult exercise,
as the OBR acknowledges. The length of the projection period,
together with the sensitivity of the figures to plausible variations
in assumptions, leads to substantial uncertainty about the central
projections.
17. An assessment of the sustainability of public
finances over a long period can be beneficial to policy makers.
It can help to illustrate future pressures of which policy makers
should be aware.
18. The exercise has some value but the Committee
does not believe that the FSR needs to be produced annually. The
same long-term policy making benefits would be served by a less
frequent publication. This should also create scope for savings
equivalent to the annual marginal cost of producing the FSR.
19. The OBR says that its annual FSR figures are
dependent on ONS population projections which are only updated
every two years. The OBR recently suggested that it might produce
future Fiscal Sustainability Reports on a frequency aligned with
the ONS population projections. However, the FSR relies on a large
number of datasets, including the ONS's labour market statistics
and the WGA financial accounting data. The publication frequency
of a 50 year FSR should not be dependent on the availability of
a single dataset when the overall projections rely on many other
important data sources and assessments. Instead, the publication
frequency should be determined by a judgement as to how the publication
can be of most public benefit.
20. The OBR is currently obliged by the Budget
Responsibility and National Audit Act 2011 to produce a Fiscal
Sustainability Report every year. We recommend that the law be
amended to reduce the publication frequency. The OBR should instead
publish a Fiscal Sustainability Report twice a Parliament. The
Fixed Term Parliaments Act 2011 sets 7 May 2015 as the date of
the next general election, and stipulates that unless the Act's
conditions for an early election are met, subsequent general elections
shall be at five year intervals thereafter. We recommend that
the first FSR should be produced at the latest within a year of
an election, and the second at a time in the last two years of
the Parliament that the OBR considers most appropriate for informing
public debate. The first report would be able to take into account
the policy announcements of the new Government and project the
impact of these on long term public finances. The second would
allow the OBR to show how the sustainability of public finances
had evolved during the Parliament, helping to inform voters in
good time before an election.
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