The Labour-dominated Treasury Select Committee yesterday launched a fresh attack on Alistair Darling, the Chancellor, for failing to come clean on how he plans to cut Britain's yawning deficit.
Giving its verdict on the pre-Budget report, the committee said all its expert witnesses had contradicted the Treasury's claim that it had provided sufficient information on how it plans to cut the the country's debt mountain.
"Although the Treasury believe the pre-Budget report contains sufficient detail about the way in which the structural deficit would be reduced, our expert witnesses all criticised the document for not providing enough information about how this will be achieved," the report said.
MPs accepted that the economy faces significant uncertainties and that there is no agreement among experts over when the massive fiscal stimulus package should start to be withdrawn.
But they sharply criticised the response of the Chancellor's team. "There is a sense that the Treasury are using uncertainty to suit themselves," the MPs complained. "Despite substantial uncertainties they still produce some forecasts out to 2014-15 and illustrative projections out to 2017-18. We can see no good reason for the Treasury failing to produce illustrative figures for future expenditure."
The report also highlighted concerns about the Treasury's optimistic assumptions for the state of the public finances. "The Treasury use what they describe as cautious assumptions in the public finances forecasts. Some economists consider the structural deficit forecast is overly optimistic, many are concerned about the large uncertainties surrounding this forecast in particular and some doubt whether sufficient attention has been given to the structural deficit existing before the recession," it said.
"Future Budgets and PBRs should attempt to quantify the downside risks around the structural deficit forecast."
Britain currently stands at risk of losing its prized AAA credit rating as a result of the deficit although while it remains on "negative outlook" ratings agencies are unlikely to act until after the general election. A cut would significantly increase the cost of public borrowing and further limit a future Government's room for manoeuvre.
Committee chairman John McFall said: "The Governor of the Bank of England encapsulated the problem of when to withdraw fiscal stimulus, when he told us 'we should do it at the right time.'
"Unfortunately, there is no common definition of the 'right time' for fiscal consolidation. What witnesses to our inquiry did agree on however, was the need for a fiscal consolidation plan to be credible. We consider clarity, even if it is clarity about the degree of uncertainty surrounding the forecasts, as essential to strengthening this crucial credibility. That is what our report calls for today."
The Conservatives' shadow chief secretary to the Treasury, Philip Hammond, said: "This report is yet more evidence that Gordon Brown's deficit reduction plan entirely lacks credibility. The Government urgently needs to listen to these warnings, show some leadership, and set out a credible plan.
"We cannot go on like this, with an irresponsible failure to get a grip on our record deficit, which is undermining international confidence in the UK. This will lead to higher mortgage costs and higher borrowing costs – choking off the recovery and the creation of new jobs the country so desperately needs."
The report also voiced concerns over housing, saying that the market seemed to have stabilised at an unsustainable level – the ratio of house prices to average earnings remains at an historic high. Members are worried about the impact of higher interest rates.Reuse content