George Osborne uses an interview in today's Financial Times to continue his attack on the Treasury's fiscal forecasts. The estimates are made by civil servants.
George Osborne uses an interview in today’s Financial Times to continue his attack on the Treasury’s growth and fiscal forecasts. As outlined by Left Foot Forward before the election, the estimates are made by civil servant, based on cautious assumptions, and in line with Bank of England forecasts.
In an interview in today’s Financial Times, the new Chancellor says:
“But the decision on the growth forecast and the fiscal forecast in previous Budgets was a decision for the chancellor of the exchequer and not for Treasury officials and so I think you need to ask the previous chancellor and the prime minister about the growth forecasts in the March Budget.”
At his press conference this morning, George Osborne said:
“Frankly what previous Chancellors have done is move [the fiscal and growth forecasts] around a bit to try and fit their Budget measures”.
Prior to the election, Mr Osborne made a similar remark when he told the Financial Times, “The [Budget] Red Book is largely a work of fiction”. At the time, a Treasury spokesman directed Left Foot Forward this morning to Boxes C1 and C2 of the Budget. The former is a list assumptions audited by the National Audit Office. The latter outlines how “caution” is worked into the fiscal forecast. In making its predictions about the deficit, the Treasury assumes that growth will come in lower than expected; that the gap between VAT receipts and the theoretical tax liability will rise; and that the unemployment claimant count will stay at 1.74 million and not fall back to 1 million by 2014 as projected.
A similar attack was attempted and dispatched at the time of the March Budget when David Cameron claimed the growth forecasts were “rubbish” and were not the same as the Bank of England forecasts. Giles Wilkes of the Freethinking Economist blog wrote:
“This is a terrible exageration. Go to the Bank’s projections from Feb. You will see all sorts of ranges. Cameron has picked the very lowest one – that which depends on market expectations of rates rising, and using the mean, not the median … We have a great deal of economic slack to absorb – which we can absorb, so long as we invest.”
A Labour party spokesman told Left Foot Forward:
“We have always been entirely clear about public spending decisions. We’re required in law to set out forecasts that take account of all decisions taken and we’ve published these in Budgets and Pre-Budgets. The suggestion that Treasury civil servants have colluded in publishing anything other than accurate figures is just plain wrong. Every new Government tries blaming the last one. This just shows the old politics is alive and well with the Lib-Con coalition.”
It is unclear whether “previous Chancellors” includes his colleague Ken Clarke.
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22 Responses to “Osborne slurs Treasury’s integrity”
Anon E Mouse
Lady J – Did you not hear David Miliband’s speech earlier today?
Try listening a bit when the leadership debates begin. May I suggest more receiving and a little less transmitting on your part.
The style of attacks you make are exactly what (both) Miliband’s have commented on as being an unattractive way to make a point.
Grow up please and be a little more constructive – you are not helping the Labour case when you reinforce the prejudices floating voters in this country have. Alternatively keep your remarks for the sixth form debating society – this is an adult blog.
Simon Tinsley
Well considering the treasury’s forecasts are above growth more than half the time, and consistently above those predicted by think tanks it is no unreasonable to suggest that they might be a touch optimistic. For further analysis, see this piece from the Adam Smith institute: http://www.adamsmith.org/publications/economy/treasury-forecasts:-the-tendencies-and-consequences-of-inaccuracy/
Perhaps being a touch less optimistic than the Treasury regularly has been would have put Britain in a better fiscal position – rather than banking on growth that never materialises. There is clearly some systematic error in their forecasting, and considering it doesn’t often match with the forecasts from think tanks, it’s not an Economics forecasting problem, but a Treasury one.
Fat Bloke on Tour
Anon E …
The reasons for the Labour party’s electoral failure include:
1) too middle class.
2) too metropolitan.
3) too rational
4) too few ideas
5) too scared of its own shadow / lack of confidence.
The current crop of candidates suggest that we have a lot to do before all these issues are sorted,
Fat Bloke on Tour
Simon T @ 8.37
The AS report you highlight isn’t worth the fag packet it was written on.
Treasury growth forecats have a better track record than any other forecsting organisation, the AS analysis only looks at the Treasury record in isolation and as such cannot be used to qualify its record.
Where I do think the Treasury had issues was its forecasting of the tax revenue, it consistently was £10bill over in its forecasts, a case of it being 2 years behind the City in dealing with the tax avoidance / tax evasion demarcation line.
Please remind the blog about the amount of business being done by Barclays SCM at this time and who benefitted and who lost out from its expertise.
Tax rates — Currently the tax take is 36% of GDP.
Low by the standards of the last 9 years.
We should be looking to 40% to support the existing standards within the public sector and the need to keep the deficit under control in the medium term.
When we look back, the AD support programme will have added 15% to the national debt, costing 0.6% of GBP to repay. Add in the support still to pay out and we will be looking at 1% of GDP to pay the interest on the debt. This is my guess of the extra resources that have been put into the economy over and above what we could have hoped for if Dave the Rave and Sniffy had been in charge in 2007.
Pure speculation I know but if they had been in charge then they would have fired up the chainsaw for a bit of slash and burn the minute the Credit Crunch announced itself.
Not brilliant regarding the extra interest but if Maggie had been in charge Bristol / Liverpool / London would be in flames at the moment and beggars would have been re-introduced onto the streets of the UK.
Never mind the chance of a double dip it would have been Death Spiral UK!
Has Laws landed Osborne in it? | Left Foot Forward
[…] of previous governments. His claims appear to undermine his boss’ less guarded description yesterday that, “frankly what previous Chancellors have done is move [the fiscal and growth forecasts] […]