The Treasury failed to inform its own fiscal watchdog in advance about a key plank of the Autumn Statement, according to the chairman of the Office for Budget Responsibility, Robert Chote.
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The Chancellor, George Osborne, announced plans to get UK pension funds to invest in infrastructure projects across Britain in his fiscal statement to Parliament last week. The announcement was trailed in the media in the days leading up to the Autumn Statement. But Mr Chote revealed yesterday, under questioning by the Commons Treasury Select Committee, that the OBR was not informed of those infrastructure plans when it was drawing up its own economic forecasts to be published alongside the statement. "We knew only what we read about it in the newspapers" admitted Mr Chote.
He also defended the OBR from the charge made by the Conservative MP, David Ruffley, that the body had got its forecasts "horribly wrong", after it was forced to downgrade its growth projections for the fourth time in 18 months. "You have to recognise that the evidence changes," said Mr Chote, adding that economic forecasting is inherently uncertain. "If our forecasts were absolutely bang on the nail now, I would be warning you that the chances of them remaining bang on the nail were virtually nil," he said.
Mr Chote suggested that the Treasury's failure to inform the watchdog of its plans to unleash a flood of private funding for a host of road and rail building projects as part of a "National Infrastructure Plan" indicated that Government officials believed the plan was unlikely to have a significant impact on the national finances. "The very fact that the Treasury did not come to us and say 'this is a policy that we think you ought to include because we think there's a confidently estimable estimate of the impact it would make on the aggregate economic forecast' is probably telling you something anyway about the amount of evidence at this stage," he said.
Mr Chote's OBR colleague Sir Steve Nickell also argued there would have been no reason for the OBR to change its forecasts. "There's no particular reason to believe that the announcements we've seen so far are going to have an overall effect on business investment," he said.
The Treasury last night said it provided the OBR with "an overview of the policy decisions, including all the fiscal implications, in the National Infrastructure Plan" as part of policy discussions ahead of the Autumn Statement.
Mr Chote, who was appointed OBR chairman in October 2010 after the departure of Sir Alan Budd, also admitted that the wording of the Chancellor's "fiscal mandate" means that Mr Osborne could, in theory, keep pushing his target of eradicating the government's structural deficit ever further into the future without ever actually balancing the nation's books. "Having chosen a rolling mandate, the Government is moving forward the end point at which they are aiming each year," he said . "It's for them to decide how much room for manoeuvre [there is]. All we can do is to be as transparent as we can about how the fiscal aggregates have performed relative to that target."
Last week, the OBR revised its forecast for UK GDP growth in 2012 to 0.7 per cent, down from 2.5 per cent at the time of the March Budget. The OBR's prediction for the number of public sector jobs set to be lost by 2017 was also revised up from 400,000 to 710,000. Mr Osborne will appear before the Treasury committee today for questioning about the Autumn Statement.Reuse content