This included an announcement of an innovation – the Office for Budget Responsibility.
Part of his speech is reproduced below.
Over the last 13 years the public and the markets have completely lost confidence in government economic forecasts. The last government’s forecasts for growth in the economy, over the past ten years, have on average been out by £13bn. Their forecasts of the budget deficit three years ahead have on average been out by £40bn. Unsurprisingly, these forecasting errors have almost always been in the wrong direction.
The conclusion is clear. We need long-lasting change in the way we put together budgets in this country.
Again and again, the temptation to fiddle the figures, to nudge up a growth forecast here or reduce a borrowing number there to make the numbers add up has proved too great.
I believe the public should be able to trust official forecasts for the economy.
To do this, I am today establishing a new independent Office for Budget Responsibility.
For the first time we will have a truly independent assessment of the state of the nation’s finances.
With help from a secretariat of civil servants, they will be in charge of making independent forecasts for the economy and the public finances. They will have direct control over that forecast. They will make all the key judgements.
For the first time we will have an independently audited and transparent national balance sheet.
… there will be nowhere to hide the debts, no way to fiddle the figures, and no way of avoiding the difficult choices that have been put off for too long.
Who can argue with his sentiments? The public think politicians might from time to time “spin” the figures to support their message. An independent body that will prevent that? Who could object?
Now let’s fast forward to 7th March 2013.
Prime Minister David Cameron made a set piece speech on the economy – restating his coalition’s message, and almost, but not quite, repeating the old Tory mantra of “no pain, no gain”.
One passage in his speech read as follows:-
As the independent Office for Budget Responsibility has made clear…
…growth has been depressed by the financial crisis…
…the problems in the Eurozone…
…and a 60 per cent rise in oil prices between August 2010 and April 2011.
They are absolutely clear that the deficit reduction plan is not responsible.
In fact, quite the opposite.
It is clearly a good thing that the independent OBR think that the coalition is on the right course, as the future direction of the economy and the “cuts v investment” agenda is vital to Britain’s finances.
But, hang on a minute, who’s that coming over the hill?
It’s Robert Chote! Chairman of the Office for Budget Responsibility!
He wrote to the PM on 8th March. Was this to praise or thank Mr Cameron for mentioning his organisation?
So Mr Cameron said that the OBR “are absolutely clear that the deficit reduction plan is not responsible” for the depression of growth in the British economy.
Funnily enough the OBR think that in the short term “tax increases and spending cuts reduce economic growth”. They also make it clear that “fiscal consolidation measures” have reduced growth.
Of course economics is a very technical and complex subject, and surely it is far more likely that the Prime Minister simply misunderstood what the OBR had said, rather than that Mr Cameron deliberately chose to misrepresent his independent watchdog?
Mr Osborne, in his May 2010 speech, predicted the OBR would create a “rod for my back down the line and for future chancellors”.
Obviously he did not think that the rod would strike his boss! Or that the watchdog created by Mr Osborne would turn on its master.
Now Mr Chote is a long way from endorsing the Opposition’s spending plans – but, in the run up to the Budget, was it wise for the PM to be embarrassed by the rebuke from the OBR?
Or will it simply be ignored, and when people refer to his March 7th speech in future, they will simply disregard the 8th March correction.
And politicians wonder why the public has a healthy scepticism (to say the least) about them!
Posted by Paul McConville