Dr Isabel Stockton

Isabel Stockton, a research economist at the Institute for Fiscal Studies, said: “The response to the covid-19 pandemic has led to a sharp downturn in economic activity. It has also, rightly, prompted a substantial fiscal policy response, the cost of which will add directly to government borrowing.

This presentation was delivered as part of the IFS press briefing following the Spring Budget 2020.

This presentation was given by Isabel Stockton as part of the "A look ahead to the March 2020 Budget" preview briefing.

If the pattern observed in the first ten months of the financial year continues for the next two, government borrowing will be £44 billion this year. This would be £3.5 billion lower than implied by the OBR’s restated March 2019 forecast. But it is worth recalling that just four years ago, in March 2016, a surplus of £10.4 billion was forecast for this financial year: i.e. we have seen a deterioration of around £55 billion in four years.

The Chancellor and Shadow Chancellor have both outlined the fiscal targets that they would seek to adhere to. Mr Javid has chosen to adopt a forward-looking rolling target aimed at current budget balance. In other words, day-to-day spending could not exceed total revenues. This is very similar in nature to Mr McDonnell’s longstanding current budget target.

Had Sajid Javid’s first Budget taken place as planned today he would have unveiled new forecasts showing that following considerable falls in borrowing over the current decade the era of deficit reduction is now at an end. Forecasts for borrowing next year would likely have been at least £30 billion higher than those made by the OBR back in March. We will get some new updates from the OBR tomorrow, but only to take account of statistical and accounting changes since the Spring. Here we provide a more fully updated set of fiscal forecasts which also take account of policy changes over the past nine months. The current political bidding war would lead us to believe that actual outturns for the deficit are likely to be significantly higher again.

"Betting on no-deal now", writes Isabel Stockton in the New Statesman, "is not only a short-term risk, but a gamble on the relationship between growth and interest rates remaining favourable 30, 40 or 50 years into the future."

This presentation was given at the launch of the IFS Green Budget 2019.