Osborne’s Office of Budget Responsibility reeks of old politics

The establishment of the Office for Budget Responsibility was Mr Osborne’s attempt to join the ‘change’ brigade, but is just a triumph of spin over substance.

It was straight from the Gordon Brown playbook: become Chancellor of the Exchequer, then give away power to esteemed, independent body to prove your market-friendly credentials. The establishment of the Office for Budget Responsibility (OBR) was George Osborne’s attempt to join the ‘change’ brigade, but it is surely a triumph of spin over substance.

The OBR, an independent quango, will take responsibility from the Treasury for the government’s economic and fiscal forecasts. The Treasury, so the argument goes, is a ministerial department, and therefore the temptation for politicians to meddle in its analysis is too great to resist. It seems Mr Osborne doesn’t trust himself.

But all is not as it seems. Colin Talbot – academic, Treasury select committee advisor and author of the blog Whitehall Watch – has wondered how the OBR can deliver credible forecasts for an emergency budget in barely a month’s time.

Yet incredibly, the OBR wasn’t created this week. It was created by the Conservative opposition in ‘shadow’ form in 2009. Are there any other examples in recent history of a political party transposing one of its own organs – little more than a political gimmick – into the Whitehall machinery within days of being elected?

The head of the shadow OBR was economist Sir Alan Budd. The head of its taxpayer-funded successor? Sir Alan Budd. He may be widely respected in his field, but he is without question a political appointee.

This clearly undermines the claim that OBR forecasts will represent an independent analysis; while there may be problems in the traditional relationship between ministers and their officials, Treasury mandarins at least don’t have to worry about losing their jobs when they deliver bad news.

All of this may be forgivable if it leads to more accurate forecasts. But unfortunately it probably won’t. Treasury forecasts are indeed usually wrong, but then so are most forecasts. With 2008 a notable exception, when Alistair Darling significantly underestimated the amount he would need to borrow, the Treasury’s forecasts are rarely less accurate than those produced by the City, think-tanks or international institutions.

The only accurate forecasts, apart from the lucky guesses, are those that present various future scenarios having factored in uncertainties – there is no suggestion that the OBR will present forecasts in this way, or even has the legal power to do so.

Mr Osborne has made this change precisely because when the compulsion for huge cuts in spending finally comes, he can blame the experts, rather than his own department. The BBC’s economics editor Stephanie Flanders says of the OBR:

“This government is going to be on a much shorter leash than the one that came before.”

Maybe so, in policy terms, but Flanders misses the politics: this is a leash designed by Mr Osborne to suit his own political interests.

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10 Responses to “Osborne’s Office of Budget Responsibility reeks of old politics”

  1. House Of Twits

    RT @leftfootfwd Osborne's Office of Budget Responsibility reeks of old politics: http://bit.ly/dtVAJr

  2. Malcolm Evison

    RT @leftfootfwd: Osborne's Office of Budget Responsibility reeks of old politics: http://bit.ly/dtVAJr

  3. atropos

    Funny, that. When Gordon Brown MP suggested such a course, this magazine fully supportrd it. Truly, 9 days is a long time in politics.

  4. yorkierosie

    RT @leftfootfwd: Osborne's Office of Budget Responsibility reeks of old politics: http://bit.ly/dtVAJr

  5. election time

    let’s be honest, it’s a step in the right direction. no more fiddling of figures is a good thing for Britain, despite that it additionaly advantages Georgie boy

  6. Vegan Panda

    RT @leftfootfwd: Osborne's Office of Budget Responsibility reeks of old politics: http://bit.ly/dtVAJr

  7. Fat Bloke on Tour

    Another blow for democracy, an un-elected technocrat specifically tasked with generating excuses for the inevitable run down of public services that will be Sniffy’s stock in trade.

    It will be a case of we know you need the money, we would love to give you the money but Big Bad Sir Alan says no and their is nothing we can do or my friends in the city will take the huff and trash our currency.

    Interesting to measure his track record in the forecasting game, the Treasury was pretty good on the GDP front though it seemed to forecast £10bill too high on the tax side.

    Surely it would be better to put the emphasis on finding out more information on the dividing line between tax avoidance and tax evasion and who is playing close to the wind. I think that the IR / Treasury have been two years behind the industry in finding and mapping this divide.

    Interesting how the press will take to any work in this area? I fear that the Torygraph and NI / SKY have been in the vanguard in active wealth management. Surely with all the emphasis on deficit reduction greater publicity should be given to all the large household name companies who seem to have significant sales and tiny tax liabilities.

    There needs to be publicity given to the amount they take from the public in sales, the profits they generate either in the UK or globally, and what they give back in tax.

    Transparency should be everywhere.

  8. Alan W

    Good article.

    As well as his pre-election role for the Tories that you note, it should also be pointed out that Budd was a cheerleader for monetarism back in the seventies and eighties, the last time the country experienced the delights of Tory austerity.

    Strangely I haven’t seen this mentioned in any of the reporting of his appointment. Just bland homilies about how respected he is and a rundown of the various public appointments he’s held, probably all lifted straight from the press release. A dutiful technocrat in other words, who wouldn’t dream of letting ideology colour his judgement, or indeed his forecasts.

  9. Mr. Sensible

    What a complete gimmic.

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