Nipped in the Budd

I was sceptical about the need for the new "Office of Budgetary Responsibility" right from the get-go, describing it as an "empty gesture" in a posting here on May 18. Nothing that's happened since then gives me any reason to change my mind.

The OBR bizarrely decided to publish its first set of forecasts, based on the previous Government's fiscal assumptions, just a week before the coalition government announced its emergency budget. The fact that the new growth forecast was lower than Labour's produced a fair amount of "I told you so"-ing from the coalition side. But come the emergency budget on June 22, with its massive fiscal tightening, the OBR had to tear up its week-old forecasts to incorporate the new assumptions. Surprise, surprise, the near-term growth outlook fell further, though with the aid of some mighty heroic assumptions, the OBR asserted that growth and employment would pick up after about 2012.

It's not clear what value there was in the OBR publishing the first set of forecasts, given that it knew they would have a shelf life shorter than that of a strawberry. The most plausible reason I can come up with is that George Osborne wanted to "prove" that his Labour predecessors had been cooking the books, which would have beeen harder to do if thge OBR had held off until after the budget. That, of course, implies that the Government leant, however gently, on the "independent" OBR. Perish the thought.

Now the head of the OBR, Sir Alan Budd, has announced that he will be leaving, after only three months at the helm. The Government says this is all perfectly in order, as Budd only ever signed a 3-month contract. Technically this certainly seems to be true, but it's very clearly not what Osborne was expecting: soon after setting up the OBR he said that he and Budd got along well, but that the acid test would be how they were doing in two years' time. He, and we, will never know.

This week's Private Eye, evidently written before Budd stepped down, has a short article querying his credentials to be the head of an "independent" OBR in the first place. He is a long-time servant of the Tory party, with strong links to the business sector. That doesn't disqualify him, of course, but it certainly makes it unlikely that he brings much of a Keynesian bias to the job. As economic forecasts always depend on your assumptions, Budd's very appointment virtually dictated the way that the OBR's first forecasts would differ from those of the Treasury. Not that they could differ too much, of course, since the OBR is in fact largely staffed by the same people who worked on the Treasury forecasts, working on secondment.

One truly amazing thing is that the OBR's forecasts are being treated as some sort of holy writ by the media, even though (a) they've already been revised once and (b) they're the work of the same people who drew up the forecasts for the Labour government that are now held in such contempt. It doesn't matter whether the head of the OBR is pure as the driven snow or a shameless political hack: all forecasts are surrounded by massive amounts of uncertainty, even at the best of times. Sir Alan Budd has no more ability to see into the future than Fabio Capello does -- though he may quite possibly be a better football manager.