Treasury rejects calls to outsource spending policy

The Treasury has dismissed calls for the assessment of its "golden rule" on the public finances to be handed over to an independent body, saying it would weaken democratic accountability for fiscal policy.

John Cunliffe, the head of macroeconomic policy at the Treasury, told MPs yesterday it was not possible to "outsource" parts of the tax and spending policy. "It is very important that all of the stages in the process that interdependent stay with one authority and that that one authority remains accountable," he told the Commons Treasury Select Committee.

His comments followed the decision by Gordon Brown in Monday's pre-Budget report to add another three years to the end of the economic cycle.

Critics say that makes it easier for him to meet his golden ruleto borrow only to invest when averaged over the economic cycle, because it gives him the freedom to adjust the timing to balance the books.

On Tuesday the Institute for Fiscal Studies, an independent think-tank, said the Chancellor had moved the goalposts so far "that they are barely still on the pitch".

The IFS called for an independent body to date the cycle to prevent any allegations of political meddling. Yesterday Michael Fallon, the Conservative MP, said an independent auditor was needed to "stop these fiddles".

Mr Cunliffe said the Treasury's assumptions on forecasts such as oil prices and unemployment, for example, were already checked by the National Audit Office. He added the NAO would be able to audit the timing of the current cycle, due to end in 2009, after the Treasury had declared it had ended.

Mr Fallon said the Treasury's forecasting records was "consistently shocking". He said it had underestimated current receipts and size of the current deficit in each of the past five years.

Mr Cunliffe defended the Treasury's record, saying it was better than other EU member states, the International Monetary Fund and the Organisation for Economic Co-operation and Development.

MPs also raised the issue of the rising ratio of taxes to GDP, which Mervyn King, the Bank of England governor, cited as a key reason for the sharp slowdown in consumer spending.

Mr Cunliffe said the ratio had gone in line only with previous Budget forecast and was not an indicator that taxes were rising. "It is not as if taxes have been increased," he said.

"The rise is due to some extent that a higher proportion of higher rate tax payers are getting a higher proportion of the pay increases. That is one reason that income tax has held up."

There was positive news for the Treasury's forecasts for a mild recovery in consumer spending from a Nationwide building society index, which posted a nine-point rise during last month, the largest change since the index began 18 months ago.

Stuart Bernau, its executive director, said: "In addition to feeling more positive about the present, there has been an upsurge in confidence about the future indicating that consumers feel that better times lie ahead for jobs, the economy and their incomes."