Budd's early departure 'a blow to Government'

Role meant to guarantee independence of economic forecasting
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Indy Politics

The departure of Sir Alan Budd as head of the interim Office for Budget Responsibility only weeks into its life has been greeted with dismay by observers, who say that it will be a blow to the Government's credibility and doubt that the Treasury will find a replacement with the same formidable reputation for competence and independence.

Andrew Tyrie, chairman of the Treasury Select Committee, said: "Sir Alan Budd is leaving the OBR whilst it is still in its infancy. His departure will be a great loss. The OBR's credibility for quality and independence of judgement is still to be fully established. Its degree of independence is already a matter of concern to some."

The economist David Blanchflower, professor at Dartmouth College in the US and a former Bank of England policymaker, said: "Which independent forecaster is ever going to touch this job which is going to destroy their reputation?" He added that only "right-wing modellers" would be willing to take on the task.

Malcolm Barr, UK economist at JP Morgan, said: "It looks distinctly odd. No convincing reason presented as yet, which leaves all sorts of potential explanations on the table."

Critics believe that Sir Alan may have been unhappy with the way that the OBR appeared to have been bounced into early publication of key employment data last week. The figures were issued shortly before Prime Minster's Questions, and left the impression of being a government-sponsored attempt to "rebut" press leaks about 600,000 jobs being cut in the public sector.

Formally, Sir Alan was appointed on a three-month contract in May to oversee the setting up of the "interim OBR", and produce the first forecasts for economic growth and the public finances ahead of the emergency Budget on 22 June. After that his role was to "provide advice to the Chancellor on the appropriate arrangements for the permanent OBR".

The Treasury confirmed yesterday that Sir Alan will leave his role "over the course of the summer", rather than the end of this month as initially rumoured, so his departure is in line with that commitment. However, the OBR will still be an interim body at that stage, so a second interim head will have to be announced, although it may be made clear that the nominee will continue in post when the OBR becomes permanently established by the end of the year. Legislation to set up the OBR, currently occupying offices in the Treasury and staffed by Treasury officials, will not be published before the autumn.

One of the other two members of the Budget Responsibility Committee, Geoffrey Dicks or Graham Parker, may take on Sir Alan's duties. Mr Dicks is a former chief economist of the Royal Bank of Scotland; Mr Parker was in charge of public finances at the Treasury. Neither carries the same prestige as Sir Alan.

In any case the expectation was that Sir Alan would continue in his role until at least the first months of the permanent OBR, if not longer.

During the launch of the OBR George Osborne joked of Sir Alan: "Whether I thank him again in a couple of years' time is another matter". Sir Alan described the OBR position as the "most exciting challenge of my professional life". The impression was of permanence.

Treasury sources say that his departure has been hyped, that the move has no sinister connotations and it "always been the case that Sir Alan planned to leave in the summer. He was appointed to provide forecasts for the emergency Budget and to advise on the establishment of a permanent OBR. He has established the OBR as a credible, independent body and the Chancellor is incredibly grateful for his important work on this issue. The Government will seek to ensure continuity for the OBR in recruiting Sir Alan's successor."

A further factor may be the sheer stress and workload involved in the post. Sir Alan is a youthful 72, but the burden of the OBR would tax many a younger man. He is unlikely to be short of offers from the private sector that will provide a better work-life balance.

Sir Alan will be able to explain his decision publicly when he gives evidence to the Treasury Select Committee in the coming months.