Osborne is playing politics with the country's finances and calling it 'new politics'.
By Craig Berry
While David Cameron and Nick Clegg were championing the cause of change, chancellor George Osborne was quietly striking a blow for continuity.
The creation - or more accurately, transposition - of the Office for Budget Responsibility (OBR) under the leadership of Sir Alan Budd was, of course, presented as part of the change agenda. Change, perhaps, but is this new politics? On the contrary, the OBR represents the resurgence very low politics; there are different faces around the Cabinet table, but cronyism and spin are here to stay.
The point of the OBR is to restore independence and credibility to the government's economic and fiscal forecasts. This is a task which has belonged to Her Majesty's Treasury for as long as anyone can remember. The argument, however, is that the fact that the Treasury is a ministerial department means that forecasts are influenced by ministers - our elected leaders, that is. Because ministers have to (or get to) sign off everything the Treasury publishes, these forecasts cannot be trusted. George Osborne seemingly doesn't even trust himself.
But is there actually any evidence that Treasury forecasts are wrong? Not really. As The Financial Times' Tim Harford, of The Undercover Economist fame, has argued, most economic and fiscal forecasts are wrong. Forecasting is an art not a science. Moreover, not only are individual forecasts wrong, but aggregations of forecasts for a particular period (the so-called 'wisdom of crowds' or perhaps 'poll of polls') are usually wrong too. With the recent exception of Budget 2008, when the borrowing forecast was woefully ambitious, the Treasury is usually no more wrong than the City, the think-tanks, the international institutions, etc. As such, there is no reason at all to assume that the OBR's forecasts will be more accurate. The only accurate forecasts, apart from the lucky guesses, are those that present various future scenarios having factored in uncertainties - there is no suggestion that the OBR will present forecasts in this way, or even has the legal power to do so.
George Osborne surely knows all this - and his more experienced Liberal Democrat colleagues Vince Cable and David Laws certainly do. So what is really going on? We could simply be witnessing a run of the mill political game of blame-shifting. Osborne knows the forecasts are going to be wrong, so he might as well make it somebody else's responsibility. He also knows that the forecasts are going to create demands for huge spending cuts - he'd rather have someone else to blame for that too. Yet there is perhaps something more sinister going on. The BBC's Stephanie Flanders, author of the Stephanomics blog, argued that by establishing the OBR Osborne is putting a very tight leash around his neck, as a signal to the markets that he is serious about tackling the deficit. But if this is a leash, it is one designed by Osborne to suit the coalition government's interest.
This is because the OBR is not actually a brand new organisation. Instead, it was set up in 2009 by the Conservative opposition as a political gimmick, principally in response to the Treasury's terrible borrowing forecast in 2008. I cannot think of many other examples in which a political party, in its first week in government, has transposed one of its own party organs into the machinery of the state. And who was the head of the 'shadow' OBR? Sir Alan Budd, of course. Only now he draws his salary from the taxpayer rather than the Conservative party coffers. Clearly, the idea that the OBR is 'independent' is far-fetched. Even leaving aside the OBR's shady origins, Budd is head of a quango rather than a department, and is therefore he is an entirely political appointee. At least under the previous system, Treasury mandarins didn't have to worry about their jobs when they were delivering bad news to ministers.
By any logic, therefore, this is a move away from independence in government forecasts. Yet the process by which Osborne and co have plotted and orchestrated this move surely makes the new government vulnerable to the charge of cronyism, and of playing politics with the country's finances. It doesn't matter that the last lot did exactly the same on countless occasions: two wrongs do not make a right.
Craig Berry is a senior researcher at ILC-UK and former policy advisor at HM Treasury. He completed his PhD on the impact of globalisation on UK trade policy at the University of Sheffield in 2008. He has published in several leading journals, including The Political Quarterly and New Political Economy, and his book 'Globalisation and Ideology in Britain' will be published by Manchester University Press in 2010.
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