A Parliament that is likely to be defined by cuts has begun with an act of creation. The Chancellor, George Osborne, has established an independent Office for Budget Responsibility, which will produce official forecasts for economic growth and government borrowing, functions that were previously performed by the Treasury. The OBR has also been charged with performing a preliminary audit of the Government's books ahead of an emergency Budget scheduled for 22 June.
Mr Osborne presented this as a revolutionary development yesterday. But in economic terms, this is nowhere near as significant as Gordon Brown's decision to grant independence to the Bank of England in 1997. The latter handed over real power over a crucial lever of economic policy – the setting of interest rates – to an institution that was firmly outside government control. Mr Osborne's great innovation is more akin to moving a less well-resourced version of the Institute for Fiscal Studies think-tank into the Treasury.
This is primarily a political, rather than economic, move. The Tory narrative in recent years has been of Labour hiding the true extent of government liabilities off the official balance sheet and massaging growth projections to justify its irresponsible spending plans. Such charges were always hopelessly exaggerated. Labour was no more, nor less, obfuscatory on the state of the public finances than any previous government.
And there is no evidence to suggest that the Treasury's growth forecasts – flawed though some might have been – were politically manipulated. But Mr Osborne will be expecting the newly-created OBR to validate his former attack lines on Labour. And a suitably gloomy report from some well-regarded technocrats on the state of the public finances will help him to attach blame for the early cuts he is planning to the previous government.
To some extent, this is all inevitable behaviour. Incoming governments always blame the outgoing one for leaving a mess and try to justify unpopular measures in the context of past profligacy. The more important question is whether the OBR has any merits in its own right. The answer is that it is simply too early to tell. If the existence of the OBR manages to boost the credibility of Treasury forecasts in the jittery financial markets then it will have done some good. And if it succeeds in imposing fiscal discipline on the Chancellor – a prospect Mr Osborne claimed to relish yesterday – that would clearly be welcome too.
Yet decisions on tax and spending are political by their very nature. They cannot be farmed out to third parties. Responsibility cannot be pooled between politicians and outside experts. This is where the existence of the OBR could prove problematic, especially if Mr Osborne attempts to use the new watchdog's authority to justify unpopular spending cuts.
There is also a danger in privileging the opinions of a small group of officials (the OBR will be run by just three individuals) when it comes to economic policymaking. First, their forecasts might prove incorrect. Many independent analysts in the private sector have been just as mistaken as those working for the Treasury in recent years. Second, the policy prescriptions from the OBR might be flawed. As we learned at the height of the credit meltdown, attempts to balance the budget at a time of savage retrenchment in the private sector can be self-defeating. When a Government cuts at the same time as the private sector, the economy goes into a tailspin. Those conditions have passed, but they could easily recur.
The individuals on the OBR might be apolitical, but we need to be sure that their judgement is reliable. Just like the coalition government, the OBR needs to prove itself in action.