Chancellor defends PM over watchdog's jobs forecast

Chancellor George Osborne today defended the Prime Minister in the ongoing row over jobs forecasts rushed out by the Government's new tax and spending watchdog.

Questions have been raised over the independence of the Office for Budget Responsibility (OBR) after it tweaked employment predictions before the June 22 Budget and released crucial figures minutes before Prime Minister's Questions two weeks ago - used by David Cameron to rebut Labour attacks over job losses.

Outgoing OBR chief Sir Alan Budd brought forward the publication of the data following an earlier leak to a newspaper, but said this week that Mr Cameron's use of the figures was "not appropriate".

Mr Osborne told the Treasury Select Committee today: "I don't think you can fault the Prime Minister for reading out public statistics."

Mr Osborne added that it was a "matter of regret" that the independence of the OBR was called into question, but it had been "made absolutely clear" to officials that it was entirely up to the watchdog to decide what was published and when.

"The evidence that Sir Alan gave to this committee, I hope, went some way towards putting to rest the conspiracy theory that some people have wanted to cook up," he said.

"The whole purpose of creating the OBR is to give confidence in the statistics produced by the Government," the Chancellor added.

The Government is searching for a permanent successor to Sir Alan at the OBR and is advertising the position tomorrow, Mr Osborne said.

Sir Alan argued this week that the body should be moved outside the Treasury building where it is currently based, equipped with its own technical capability and able to recruit academics and City forecasters.

He says the OBR should also have the freedom to decide its own work priorities, access all relevant information and publish forecasts or analysis without ministerial oversight or approval.

Mr Osborne said the committee would have the power to veto the appointment of a new chairman.

He said: "This will be the first time that any select committee has ever had a veto on an appointment. Obviously it's entirely up to you whether you want to take up that offer, and if you feel it appropriate, put it in the statute that I propose to present to Parliament."

Committee chairman Andrew Tyrie asked if members would have the power to take action if they lost confidence in the OBR's chairman.

But Mr Osborne said this could "undermine its independence".

MPs also grilled the Chancellor on his recent emergency Budget, questioning whether his austerity plans increased the risk of killing off the economic recovery.

Mr Osborne said: "The biggest external factor out there has been concern about sovereign debt sustainability. I was very conscious that the UK has the second largest budget deficit in the EU.

"The Budget has gone quite a long way in reassuring people that we are serious about dealing with this very large budget deficit."

Greater confidence in the UK has been reflected in the market rates for UK debt - a "significant" monetary stimulus to aid growth, according to Mr Osborne.

But MPs raised concerns over measures to help the private sector support a recovery through growth and not just spending cuts.

Committee member John Thurso said "history will judge the success of this Budget", but the Chancellor said measures such as the reduction in corporation tax and small companies tax were specifically designed to help firms.

In his first session in front of the Commons committee, Mr Osborne added it was right to impose a new levy on UK banks, announced in the June 22 Budget.

"I thought it was perfectly reasonable to ask the UK banking sector to make a contribution for reasons of fairness," he said.