Anne Penketh: Rewarded for being wrong

The season of predictions is upon us once more. For the past week, the newspapers and airwaves have been awash with professional experts warning of three million unemployed in Britain in 2009 or of Israel bombing Iran.

It's a risky business for investment analysts, as we know from the bitter experience of 2008 when we discovered that opinions came cheap but their consequences were costly as people lost their savings in Iceland and their future pensions on the stock market.

In the US, crooked hedge fund managers will pay for their crimes in court. The market will probably deal with those such as Nicola Horlick who failed to subject Mr Madoff to sufficient scrutiny and who are now blaming the regulators for their own lack of caution. Whatever happened to the rule of thumb: if it looks too good to be true it is too good to be true?

On 27 December, the Financial Times subjected itself to a humbling experience by recalling the predictions of a handful of investment analysts for 2008. They added a "wily fox" for good measure. Only one of the analysts came anywhere near predicting the true scale of the economic meltdown last year, although of course the wily fox was ahead of the game.

But we journalists should also take on our share of the blame. Many have already held up their hands. The hapless Anatole Kaletsky of The Times does so year after year, it seems. His mea culpa of last 29 December was a gem in which he says he "must apologise to anyone misled by my analysis".

This is serious stuff because we trust the views of the experts who spend their professional lives reading the runes of business and the economy. In these troubled times, those in the predictions business should be subjected to annual scrutiny and if they persist in getting it wrong, it's not longer just "oops, sorry" but "three strikes and you're out".

In the foreign affairs arena, had we listened to the majority of pundits and their predictions for last year, Hillary Clinton or John McCain would be about to enter the White House as US president. In May 2008, as she fought on against Barack Obama, The Daily Telegraph's US editor, Toby Harnden, was cheerfully explaining to "those slow on the uptake – here's why Hillary will win".

What enrages me, though, is that people are rewarded for getting it wrong. It was only last week that we learned that the Treasury's top official, Nick Macpherson, had been knighted for his role in the £500bn bank bailout even before the results of the emergency measures can be known.

We also discovered that Our Man in Tehran in 1978, Anthony Parsons, told his masters in London that there was "no serious risk" of the Shah being overthrown even as the British embassy was in flames. His reward for his mistaken advice? A promotion with a job as British ambassador to the UN during the Falklands war.

The same goes for John Scarlett, the head of the Joint Intelligence Committee who allowed the Blair government to announce before the Iraq war that Iraqi chemical and biological weapons could be deployed in 45 minutes. Scarlett has since received a knighthood and been promoted to head the British secret service.

So it goes with the predictions business. Sometimes these judgement calls can be a matter of life and death. Unless there is greater accountability, I fear that these annual predictions will continue to be just a load of (crystal) balls.