MPs attack Office for Budget Responsibility for 'charging to the aid' of Osborne


The head of the Government’s independent fiscal watchdog was today forced to defend himself from “charging to the aid of the Chancellor” in tetchy exchanges with MPs.

Office for Budget Responsibility chairman Robert Chote, pictured, drew fire from members of the Treasury Select Committee over changes to the watchdog’s forecasting model revealed in last week’s Autumn Statement. Some experts claim this makes it easier for Chancellor George Osborne to balance the underlying budget deficit over the next five years.

The debate rests on the crucial judgment on the size of the so-called “output gap” — a hugely uncertain measure of the amount of slack in the economy. A smaller gap means that more of the UK’s deficit is “structural” and has to be tackled by Osborne with spending cuts or tax rises, rather than being whittled away naturally by economic recovery.

According to the OBR’s latest forecasts, it believes the output gap is currently 2.7% — wider than suggested by the business and consumer surveys given more weight by the watchdog previously.

MP George Mudie said Chote risked being seen as “charging to the aid of the Chancellor” with the  changes while fellow Labour MP Pat McFadden said it was a “little bit like putting your finger in the air and taking a guess”.

McFadden added that the forecasts “were built on the shakiest of foundations”.

Chote said the accusations the OBR had changed the goalposts to suit the Chancellor was “unfair” and based on a “selective” study of the body’s forecasts.

He said the OBR had also made it more difficult for Osborne to hit the target by lowering its forecasts for the economy’s potential growth over the next  five years.

He told Mudie: “Taking the two things together we have made the Chancellor’s life more difficult rather than easier.

“Based on a representative  rather than a selective view we think the criticism does not  stack up… as I have explained to you repeatedly that is a complete misrepresentation of what  has happened.”

Chote added: “If we were to pull back from our best judgement because we were afraid of you or anybody else being rude to us, we would be no good to you or anybody else.”

The OBR slashed its growth forecasts for this year to -0.1%, and believes the economy will manage an advance of just 1.2% in 2013.

“We have done a good job demonstrating the hazards of economic forecasting,” the chairman said.