Why should we believe you this time? That was the gist of the Labour response to George Osborne's mini-Budget last week. Judging by the phone-ins and the discussions on what Lord Justice Leveson calls the uncivilised "ethical vacuum" of the internet, Labour is in tune with public opinion. Sometimes, obviously, that is desirable for a political party. On this occasion, though, it is dangerous.
Given that Ed Balls, the Shadow Chancellor, was on poor form, it was left to John Denham, the former Cabinet minister who now serves as a parliamentary private secretary to Ed Miliband, to express Labour's incredulity eloquently. He said that, since Osborne's emergency Budget in July 2010, every time the Chancellor had come to the House "he has told us that the economy has not grown since the last time he was here, that he is planning to borrow more than the last time he was here, that spending on public services will be cut more than the last time he was here".
Osborne's defence was to say that, unlike previous Chancellors, he has contracted out economic forecasting to the independent Office for Blame Repositioning, as I call it. That means, I suppose, that the forecasts are slightly more likely to be right than when the Treasury was responsible for them, because the possibility of political influence has been reduced. But the OBR's forecast made at the time of the Budget only nine months ago has now been revised, increasing public borrowing by £104bn over the next five years. All that means is that the blame game moves on.
Thus Jeremy Paxman, on Newsnight, treated Robert Chote, the chairman of the Office for Budget Responsibility, with only slightly less contempt than he usually reserves for politicians. People ask "what the point of you is", Paxman told him, when you made forecasts and "got them wrong".
This is Paxman at his childish worst. All economic forecasts are wrong and nobody knows which ones will turn out to be more or less accurate. Equally, all government decisions have to make assumptions about the future. Having Chote, who was Young Financial Journalist of the Year on this newspaper in 1993, make an intelligent guess is the worst way of doing it, except for all the other ways that have been tried, as Winston Churchill might have said.
For five years now, under Labour and the coalition, people who are good at Microsoft Excel have been making multi-coloured graphs showing how things have turned out worse each successive year than the forecasters predicted. This reflects two mistakes forecasters often make: to assume that things will return to normal after a shock; and to adjust forecasts so they are not too far out of line with everybody else's.
For five years, the mistakes have tended to be in one direction, as described by Denham, requiring Alistair Darling and now Osborne to come to the Commons twice a year to say growth has been lower than expected and that public spending will have to be cut and taxes raised further.
At some point, this pattern is likely to reverse, and forecasters will find that they have overshot downwards instead of upwards. Although there is also the possibility that things might turn out even worse if, for example, the euro crisis deepens. Yet a lot of people made the one assumption about last week's statement that is most likely to be wrong, namely that the OBR's forecast will be a bit too optimistic, wrong by about the same amount as it has been recently.
That is why the "black hole" of £27bn identified by the Institute for Fiscal Studies in the two years after the 2015 election date is neither a black hole nor such a precise number. A black hole is a point of such mass and gravity from which not even light can escape. This £27bn, on the other hand, is the difference between two very large numbers, and a mere quarter of the amount by which the OBR estimate of government borrowing has changed in just nine months.
I forecast, therefore, that the state of the public finances by the time of the election will either be better, or very much worse, than the OBR predicts. If it is much worse, then all last week's political bets are off. The argument over the 1 per cent rise in benefits and tax credits, a cut when inflation is taken into account, would be beside the point. It would not matter whether most voters think it hurts skivers or strivers. The important thing would be whether people trust Cameron and Osborne or Miliband and Balls, which might depend in turn on whether the Government were seen as being to blame for the triple dip.
And if the economy turns out better than the OBR predicted, Labour really is in trouble. Ed Balls might have been caught out by Osborne's accounting trick to make it look as if the deficit were falling, but Ed Miliband was caught out by the Chancellor's bigger political trick. Osborne has stolen Miliband's "squeezed middle". The effect of his new measures last week is to take from both the rich and the poor and to give to households in the middle of the income distribution. Thus he forced Labour into its historic stance of defending the poorest, in low-paid work and on benefits.
I forecast that this, however worthy, will not be a good position for the Labour Party at the time of the election.
Register for free to continue reading
Registration is a free and easy way to support our truly independent journalism
By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists
Already have an account? sign in
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies