Since the mid-Eighties they have failed to predict both the strongest boom in 15 years and the longest recession since the Second World War. The Treasury spent a year forecasting an imminent recovery which still has not arrived and insisted for two years that it could keep Britain in the European exchange rate mechanism, only to be forced out in spectacular fashion.
Unfortunately, the seven wise men - chosen from Britain's leading economists - have not been blessed with perfect foresight either. Like the Treasury, a majority of them got their predictions wrong.
Of the 41 forecasting groups in the Independent on Sunday's annual Golden Guru award, the seven wise men (or at least the six who forecast regularly) averaged only 24th place last year. This was better than the Treasury's 29th place, but still well down the table. The Golden Guru award ranks forecasters by their ability to predict economic growth, inflation and unemployment.
The inadequacy of the seven's record has encouraged other City and independent economists - some of whom are nursing bruised egos from their omission - to set up a rival group. They plan to declare their hand early in the new year, challenging Mr Lamont to bet some of his own money (no credit cards accepted) that his team will outperform them.
Four of the seven - Davies, Britton, Currie and Sentance - are members of the economic mainstream; the others - Godley, Minford and Congdon - are mavericks.
Professor Doug MacWilliams, chief executive of the Centre for Economic and Business Research and former economic adviser to the CBI, says that 'the guys chosen by the Treasury have not got a particularly good forecasting record' and is critical of the high proportion of the seven who have worked at, or been closely involved with, the Treasury before. 'There is this assumption that you are not a real economist if you have not worked there.'
The seven will meet thrice yearly under the chairmanship of Alan Budd, the Government's chief economic adviser, who will write a report on the meeting reflecting both a 'central tendency' and the range of opinions. But the Treasury has long defended its forecasting failures by arguing - with justification - that, on average, outsiders do no better. So does it really believe that the advice of the independent panel of forecasters would have prevented any of the errors of forecasting and policy made since the mid-Eighties?
The Treasury is strangely silent on this question, while Mr Budd says the panel 'is a genuine attempt to open up the economic debate'. But plenty of people - many inside the Treasury - dismiss it as a cynical PR exercise. They fear it will offer a wide range of predictions behind which the Chancellor can hide when mistakes are made.
Even the panel's members have their doubts: 'I don't know what the Treasury is up to,' said one. 'It cannot be because they want our advice - they know what we all think anyway. There is probably a modest amount of genuine glasnost, but they may just be looking for someone else to blame.' Another panel member argues that 'the success of the group depends on whether the Treasury uses it for information-getting or as a cloak to justify things they would have done anyway'. The seven hold such disparate views that the Treasury should find it almost impossible to publish a forecast with which at least one of them disagrees. Mr Britton predicts that the economy will grow by 2 per cent next year. Professor Godley last forecast that it would shrink by 0.3 per cent. The Treasury's Autumn Statement forecast of 1 per cent growth lies snugly in between. The seven's ideological views - from old-style Keynesian to rabid Thatcherite - are even more diverse.
The Treasury's own faceless forecasters - whose morale is already low and whose numbers are diminishing - fear they will be forced to publish forecasts similar to the panel's consensus, so the Treasury can never be singled out for particular criticism.
But Mr Budd faces an almost superhuman task in getting the panel to agree a consensus. Some of the panellists believe he will end up having to add the forecasts and dividing by seven. 'Then there is no point having a panel or a meeting at all,' a Treasury spokesman admits.
Some critics have even called the panel's independence into question because of the way in which some of its members are funded. The London Business School and the National Institute both run large, sophisticated computer models of the economy which are heavily reliant on Government finance.
Both are threatened by possible
cuts when the cash-strapped Economic
and Social Research Council
allocates grants for the mid-Nineties.
The Liverpool and Cambridge forecasting teams have both already had their funding axed, and would no doubt like it back. Indeed, one of the Cambridge group has already argued that if the Treasury expects Professor Godley to act as a proper independent forecaster it will have to 'cough up some money'. (Panellists only receive pounds 125 per meeting, plus expenses.)
But there is no sign yet of panel members playing safe. Several have yet to accept their invitations; but Professor Minford has already laid out the circumstances (ie, being ignored) in which he would resign.
Meanwhile, Professor Godley has defied conventional wisdom to call for a further devaluation of sterling and interest-rate cuts. He has been expressing much the same views for 20 years, and has always been ignored. But last week, as a consequence of his elevation, the pound deferentially weakened. He is hopeful about the panel's future: 'The more I think about it, the more creative it could be.' Other members are more reserved: 'It will do no harm and I suppose it might just do some good.'
'Wise men split', Business
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